Oil rises on hopes of summer fuel demand

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By Alex Lawler

LONDON (Reuters) -Oil prices rose on Monday, buoyed by hopes of rising fuel demand this summer, though gains were capped by a strengthening of the dollar on receding 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 barrels per day (bpd).

futures gained 53 cents, or 0.7%, to $80.15 a barrel by 1320 GMT. U.S. West Texas Intermediate crude futures were up 57 cents or 0.8% at $76.10.

“The increase in prices started as the U.S. wakes up and kicks off the new week. Investors on the other side of the Atlantic clearly dismiss the Euro weakness and the resultant dollar strength due to French snap elections,” said Tamas Varga of oil broker PVM.

“There is a growing conviction that demand will be buoyant as the summer driving season approaches leading to considerable stock draws”.

Oil last week posted a third straight 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 rising supply.

Despite the OPEC+ cuts, oil inventories have risen. stocks rose in the latest week, as did gasoline stocks. Energy consultancy FGE also expects oil to rally, with prices reaching 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 trim expectations for interest rates. [USD/]

© Reuters. FILE PHOTO: The Bryan Mound Strategic Petroleum Reserve, an oil storage facility, is seen in this aerial photograph over Freeport, Texas, U.S., April 27, 2020. REUTERS/Adrees Latif/File Photo

The euro, meanwhile, fell after French President Emmanuel Macron called a snap parliamentary election.

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