Oil prices climbed in early trade on Monday, clawing back over half of Friday's losses, on hopes for a stimulus deal to shore up the U.S. economic recovery and a pledge from Iraq to deepen its crude oil supply cuts.
U.S. West Texas Intermediate (WTI) crude futures rose 49 cents, or 1.2per cent, to US$41.71 a barrel at 0010 GMT, while Brent crude futures were up 40 cents, or 0.9per cent, at US$44.80 a barrel.
While both benchmark contracts fell on Friday, hurt by demand concerns, Brent ended the week up 2.5per cent, with WTI up 2.4per cent.
Hopes grew on Sunday that a stand-off would end between U.S. Democrats and the White House on a new support package for cash-strapped U.S. states hit by the coronavirus pandemic.
U.S. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin both said they were willing to restart talks on a deal to cover the rest of 2020.
At the same time, Saudi Arabian Aramco's Chief Executive Amin Nasser said he sees oil demand rebounding in Asia as economies gradually open up after the easing of coronavirus lockdowns.
There's a small undercurrent of positivity this morning emanating from comments by Saudi Aramco who are seeing a recovery in demand, said AxiCorp market strategist Stephen Innes.
On the supply side, Iraq said on Friday it would cut its oil output by a further 400,000 barrels per day in August and September to compensate for its overproduction in the past three months. The move would help it comply with its share of cuts by the Organization of the Petroleum Exporting Countries and their allies.
Saudi Arabia and Iraq forging better relationships over the oil deal are excellent for the compliance outlook, Innes said.
The Saudi and Iraqi energy ministers said in a joint statement that OPEC+ efforts would improve the stability of global oil markets, accelerate its balancing and send positive signals to the markets.