Investing.com-- Oil prices rallied Monday, following three straight weeks of losses, as hopes grow that rising demand over the summer could tightened crude supplies in the months ahead.
At 14:12 ET (18:12 GMT), Brent oil futures rose 2.3% to $81.49 a barrel, while West Texas Intermediate crude futures rose 2.7% to $77.58 a barrel.
Summer demand hopes front and center
Worries about supply outstripping demand pushed bearish bets on crude close to record highs, UBS said, citing a recent Commitment of Traders reportr, though added that positioning was overly pessimistic as crude supplies are likely drop over the summer months.
The Commitment of Traders, a gauge of how traders are positioned, for the week ended on 4 June showed that bet on oil prices falling of 38.5 million barrels were added, while about 70.5 million barrels bullish bets were closed, pushing short positioning close to record highs.
"We think this is overly pessimistic," UBS said, forecasting oil supplies to "likely to point downwards over the coming weeks." as the seasonal pick in crude demand over the summer is underway.
Expectations for a pick up summer demand come just a day ahead of Tuesday's release of OPEC's monthly report, with the cartel scheduled to provide its outlook of annual oil supply and demand.
The International Energy Agency also releases its monthly report on Thursday.
Fed meeting, inflation data on tap as dollar sags
The dollar curbed some gains, but had little sway on oil prices as cautious trading set in ahead of the Federal Reserve's decision on Wednesday that will likely see the central bank stay pat on interest rates and signal fewer rate cuts for the year.
The Fed is set to meet later this week and is widely expected to keep rates steady. But any signals on rate cuts will be closely watched.
Before the Fed, consumer price index inflation data is also due on Wednesday, and is likely to factor into the central bank’s outlook.
A weaker dollar boosts oil demand by making the commodity more attractive to international buyers.
Goldman sticks to tight range
Still, despite the numerous factors impacting the crude market, Goldman Sachs (NYSE:GS) sticks to a $75-$90 a barrel range for Brent this year.
"We still see $75/bbl as a floor under Brent. For one thing, physical demand for oil, including from China and the US SPR, tends to rise when prices fall. Second, financial demand is likely to rise substantially if currently very low
speculative positioning normalizes. Third, US supply will remain price dependent, and OPEC can delay, pause, or reverse its plan to raise production if required to stabilize the market. Moreover, OPEC’s agreement on new production baselines through 2026 signals stronger cohesion, further reducing the likelihood of much lower prices," the bank said, in a note dated June 9.
Turning to the $90 a barrel ceiling, "OPEC has announced a data-dependent plan to gradually unwind voluntary production cuts from Q4 if the market tightens."
(Peter Nurse, Ambar Warrick contributed to this article.)