By Shariq Khan
NEW YORK (Reuters) -Oil prices rose on Monday, as signs of improving demand in top importer China and potential supply disruptions in Canada helped prices bounce from the previous session’s $1 a barrel slide.
Brent crude futures rose 42 cents, or 0.5%, to $83.21 a barrel by 1:51 p.m. ET (1751 GMT). U.S. West Texas Intermediate crude futures rose 66 cents, or 0.8%, to $78.92 a barrel.
Chinese data at the weekend showed consumer prices rising for a third straight month in April while producer prices extended declines, signalling improved domestic demand. The country is also planning to raise 1 trillion yuan ($138.26 billion) to stimulate key sectors of the economy.
Oil prices also drew support from expectations of strong U.S. gasoline demand, as motorist group AAA forecast this year’s Memorial Day travel activity will be the highest since 2005, with road trips at a record since 2000.
U.S. crude oil stockpiles likely declined last week, according to a preliminary Reuters poll of analysts. Declining stocks are typically a sign of improving demand.
On the supply front, investors are looking out for potential oil supply disruptions due to wildfires in Western Canada, which the country’s government has warned could be ‘catastrophic’.
“Canadian oil sands production currently has a 3.3-million-barrel daily capacity, which is very likely be affected moving into the summer,” said Alex Hodes, analyst at energy brokerage StoneX.
Elsewhere, in what has become a series of attacks by Russia and Ukraine on each other’s energy infrastructure, Kyiv launched its latest salvo over the weekend with a drone attack that partly shut down the largest refinery in southern Russia, sources told Reuters.
Oil prices have also found support from enduring expectations that OPEC+, the Organization of the Petroleum Exporting Countries and its allies, will extend supply cuts into the second half.
No. 2 OPEC producer Iraq is committed to oil production cuts agreed by the producer group, its oil minister told the state news agency on Sunday. Those comments followed his suggestion on Saturday that Iraq would not agree to any additional cuts proposed by the wider group at its meeting on June 1.
Traders said they are more cautious about the Middle East as hopes have been dashed for a ceasefire in Gaza. Israel on Sunday pushed back into North Gaza, while the death toll in Israel’s military operation has passed 35,000 Palestinians, according to Gaza’s health ministry.
Investors will watch the U.S. Consumer Price Index data due on Wednesday for clues to when the Federal Reserve will consider cutting interest rates, Hodes said.
Analysts expect the U.S. central bank to keep its policy rate on hold for longer, supporting the dollar and making dollar-denominated oil more expensive for buyers holding other currencies.
($1 = 7.2325 Chinese yuan renminbi)
(Reporting by Shariq Khan in New York, Natalie Grover in London and Florence Tan in SingaporeEditing by David Goodman and David Gregorio)
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