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Oil rises on hopes of growing fuel demand

Brent crude

Brent crude futures added 28 cents, or 0.4%, to $79.90 a barrel, and U.S. WTI crude futures were up 36 cents, or 0.5%, at $75.89

Oil prices rose on Monday, buoyed by hopes of growing fuel demand this summer, though gains were capped by a strengthening of the dollar on fading expectations of imminent cuts to U.S. interest rates.

Goldman Sachs analysts expect Brent to rise to $86 a barrel in third quarter, saying in a report that solid summer transport demand will push the oil market into a third-quarter deficit of 1.3 million bpd.

Brent crude futures added 28 cents, or 0.4%, to $79.90 a barrel by 0815 GMT. U.S. West Texas Intermediate (WTI) crude futures were up 36 cents, or 0.5%, at $75.89.

We believe current market positioning is overly pessimistic, considering that we expect larger oil inventory declines over the next few weeks, UBS analysts stated in a report.

Oil last week posted a third consecutive weekly loss on concerns that a plan to unwind some production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, from October will add to increasing supply.

Despite the OPEC+ cuts, oil inventories have increased. U.S. crude stocks increased in the latest week, as did gasoline stocks. Energy consultancy FGE also expects oil to rally, with prices touching the mid-$80s into the third quarter.

We continue to expect the market to firm up, FGE said. But it will likely need a convincing signal of tightening from preliminary inventory data.

A strong dollar weighed on the market, with the currency rallying after Friday’s U.S. jobs data prompted investors to cut expectations for interest rates.

A stronger U.S. currency makes dollar-denominated commodities like oil more expensive for holders of other currencies.

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