Oil prices rose 1% on Monday, as expectations that OPEC would cut output if needed to support prices, coupled with conflict in Libya and rising demand amid soaring natural gas prices in Europe, helped offset a dire outlook for U.S. growth.
U.S. West Texas Intermediate (WTI) crude futures jumped $1.09, or 1.2%, to $94.15 a barrel by 0519 GMT, adding to a gain of 2.5% last week.
Brent crude futures rose 71 cents, or 0.7%, to $101.70 a barrel, extending last week's gain of 4.4%.
"Oil prices are inching higher on hopes of a production cut from OPEC and its allies to restore market balance in response to the revival of Iran's nuclear deal," said Sugandha Sachdeva, vice president of commodity research at Religare Broking.
Strong oil exports from the U.S. and a bigger-than-expected draw of oil inventory in the last couple of weeks have also eased some demand concerns amid slowdown fears, Sachdeva added.
Both benchmark contracts had traded lower earlier in the day as the dollar climbed after Friday's blunt comments from Federal Reserve Chairman Jerome Powell that the United States faced a prolonged period of slow growth amid further rate hikes.
"While a strong dollar restrains broad commodity prices, the undersupply issue in the oil markets will probably continue to support the upside bias," said CMC Markets analyst Tina Teng.
Oil prices have been buoyed by hints from Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, that they could cut output in order to balance the market.
The United Arab Emirates is aligned with Saudi thinking on output policy, a source told Reuters on Friday, while the Omani oil ministry also said it supported OPEC+ efforts to maintain market stability.
Sources said last week OPEC would consider cutting output to offset any increase from Iran, should oil sanctions be lifted if Tehran agrees to revive a nuclear deal.
Heavy clashes in Libya's capital that killed 32 on the weekend sparked concern that the country could slide into a full-blown conflict, leading to a disruption in supply of crude from the OPEC nation.
"Besides, soaring gas prices are likely to result in gas-to-oil switching, which remains a positive trigger for prices," Sachdeva said.
