Crude prices gained strength on Tuesday with hopes of more economic stimulus in China, an expected set-back in US shale oil production and rising seasonal demand from developed economies.
Brent for July delivery rose 95 cents to $63.64 a barrel in early morning trade, with front-month US crude climbing 73 cents to $58.87 a barrel. US oil prices have been on a rising trend after hitting almost six-year lows in March, supported by seasonal demand from developed economies which rise in the summer months with more drivers taking to the roads for holidays in Europe and the US.
"There is currently seasonal demand for oil, so there is less of a build in crude oil stocks," Olivier Jakob at independent trading advisory firm PetroMatrix in Zug, Switzerland, said. "But there is still too much oil for the rally to take hold."
Data on Monday showed China’s oil imports plunging by about 11 percent in May compared with a year earlier, in their steepest drop since November 2013. The country’s consumer price inflation fell more than expected in May, to 1.2 percent year on year. China’s producer prices fell for the 38th consecutive month.
Oil supply looks likely to keep on being strong in the coming months, with Organisation of the Petroleum Exporting Countries (OPEC) on Friday agreeing to keep output unchanged at above 30 million barrels per day, and Iran and Iraq expected to boost production.
On the other hand, US shale oil output is forecast to decline for the third consecutive month in July despite rig productivity remaining high, according to recent data from the US Energy Information Administration.
Other Energy Information Administration (EIA) data on Wednesday is expected to show US commercial crude oil stocks falling for a sixth straight week in the week ended June 5, according to preliminary surveys.