Oil prices edge up amid summer demand optimism

On Monday, oil prices experienced a slight increase, driven by optimism around rising fuel demand during the summer. However, the gains were tempered by the dollar's strengthening, following diminished expectations of imminent U.S. interest rate cuts.

Goldman Sachs analysts predict that Brent crude prices will rise to $86 a barrel in the third quarter, citing robust summer transport demand as a key factor that will push the oil market into a third-quarter deficit of 1.3 million barrels per day (bpd).

By 0950 GMT, Brent crude futures had increased by 16 cents, or 0.2 per cent, to reach $79.78 a barrel. Meanwhile, U.S. West Texas Intermediate crude futures rose by six cents to $75.59.

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

Last week, oil prices marked their third consecutive weekly decline due to concerns that the planned reduction of production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, starting in October, would lead to increased supply.

Despite the OPEC+ production cuts, oil inventories have continued to rise. The latest data showed an increase in U.S. crude and gasoline stocks. Energy consultancy FGE also anticipates a price rally, with oil prices expected to reach the mid-$80s by 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."

The market was also influenced by a strong dollar, which gained strength following U.S. jobs data released on Friday, leading investors to adjust their interest rate expectations. The euro, on the other hand, fell after French President Emmanuel Macron called for a snap parliamentary election.

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