Oil futures rose Monday, on track to post a third straight climb, as the U.S. dollar continued to pull back from multidecade highs and investors turned their attention to supply issues.
Price action
West Texas Intermediate crude for October delivery rose $1.79, or 2.06%, to $88.58 a barrel on the New York Mercantile Exchange.
November Brent crude, the global benchmark, was up $1.84, or 1.98%, at $94.68 a barrel on ICE Futures Europe.
October natural gas gained 4.6% to $8.364 per million British thermal units.
Market drivers
The ICE U.S. Dollar Index was down 0.6%, extending a pullback from a 20-year high as the euro bounced. A stronger dollar had been blamed partly for a slide that saw crude last week drop to its lowest since January, while fears over the outlook for demand also weighed on the complex as investors focused on aggressive monetary policy tightening by the Federal Reserve and other major central banks.
A stronger dollar is seen as a weight on commodities priced in the unit, making them more expensive to users of other currencies.
"Although lockdowns in China and still-elevated Russian oil exports are likely to ease some tightness in the global oil market in the near term, we still expect oil supply to tighten and prices to climb in the coming quarters," wrote strategists at UBS, in a research note dated Monday.
The analysts said sales from strategic oil reserves of OECD countries will remove more than one million barrels per day of supply from November onwards, and oil demand is set to rise given the need for fuel to generate electricity due to higher prices and reduced availability of natural gas and coal.
Meanwhile, developments around Iran nuclear talks may also be supportive, analysts said. France, Germany and Britain on Saturday said they had "serious doubts" about Tehran's commitment to reviving the pact due to its insistence on a closure of a probe by the UN's nuclear watchdog into traces of uranium at three sites, according to reports. Iran called the joint statement "regrettable."
Warnings by the Organization of the Petroleum Exporting Countries and their allies -- a group known as OPEC+ -- about volatile price action and the disconnect with fundamentals might also be a factor in the gains, said Craig Erlam, senior market analyst at OANDA, in a note.
OPEC+ earlier this month agreed to cut production by 100,000 barrels a day in October.
"The group sent a warning shot earlier this month and may be tempted to send another prior to the October meeting. The recovery in the price may be supported by that, alongside a broader improvement in risk appetite in the markets and a weaker dollar," Erlam said.