Oil prices advanced above $70 a barrel, as optimism grew over the fuel demand outlook during the summer driving season of the United States.
Prices were also boosted after data from China showed that factory activity expanded at its fastest this year in May.
Brent crude futures for August gained 86 cents, or 1.2%, to $70.18 a barrel by 0504 GMT. U.S. West Texas Intermediate crude for July was at $67.61 a barrel, up $1.29, or nearly 2% from Friday’s close, with no settlement price for Monday due to a U.S. public holiday.
In addition, Brent oil advanced after the OPEC+ alliance forecast a tightening global market ahead of a production policy meeting.
Due to U.S.’ sanctions on Iran and Venezuela, both countries’ oil production levels are in decline, and are expected to account for a total of 1.76 million barrels per day (bpd) in lost output this year.
A robust recovery in the U.S. and Europe has given OPEC+ the confidence that global markets can absorb additional barrels, despite a Covid-19 comeback in parts of Asia and the prospect of more supply from Iran should a nuclear deal be revived.
OPEC+ decided in April to return 2.1 million barrels per day (bpd) of supply to the market from May to July, as it anticipated global demand would rise despite surging coronavirus cases in India, the world’s third-largest oil consumer.
“We believe that the market will be able to absorb this additional supply, and so would expect the group to confirm that they will increase output as planned over the next 2 months,” ING Economics analysts added.