Oil is gaining value as cooling US inflation points to a possible easing

By Florence Tan and Siyi Liu

SINGAPORE (Reuters) -Oil prices rose on Monday after lower-than-expected U.S. inflation data revived hopes for further policy easing, although prospects for a supply glut next year weighed on the market.

Brent crude futures rose 37 cents, or 0.5%, to $73.31 a barrel by 0729 GMT. U.S. West Texas Intermediate crude futures rose 40 cents, or 0.6%, to $69.86 a barrel.

“Risk assets, including U.S. stock futures and crude oil, started the week on firmer footing,” said IG market analyst Tony Sycamore, adding that cooler inflation data helped ease concerns following the Federal Reserve’s aggressive rate cut.

“I think the passage of legislation by the U.S. Senate to end last weekend’s brief shutdown helped,” he said.

Both oil benchmarks fell more than 2% last week on concerns about global economic growth and oil demand, after the US central bank expressed caution about further monetary policy easing. Research from top Asian refiner Sinopec, which showed Chinese oil consumption would peak in 2027, also weighed on prices.

Money managers increased their net long positions in US crude futures and options in the week to December 17, the US Commodity Futures Trading Commission (CFTC) said on Friday.

Concerns about European supplies eased after reports that the Druzhba pipeline, which sends Russian and Kazakh oil to Hungary, Slovakia, the Czech Republic and Germany, has restarted after being shut down on Thursday due to technical problems at a Russian pumping station.

According to the Belarusian state news agency BelTa, shipments resumed on Saturday. On Sunday, Hungarian Foreign Minister Peter Szijjarto said Druzbha deliveries to the country had restarted.

Before the shutdown, the pipeline transported 300,000 barrels of crude oil per day.

US President Donald Trump on Friday urged the European Union to increase imports of American oil and gas or face tariffs on the bloc’s exports.

The European Commission said it was ready to discuss with Trump how to strengthen the already strong relationship, including in the energy sector.

Trump also threatened on Sunday to reassert US control of the Panama Canal, accusing Panama of charging excessive tariffs to use the Central American passage and drawing a sharp rebuke from Panamanian President Jose Raul Mulino.

In the US, the number of operating oil rigs rose by one last week to 483, the highest number since September, Baker Hughes reported on Friday.

Macquarie analysts forecast a growing supply glut next year, which will push Brent prices down to an average of $70.50 per barrel, compared to this year’s average of $79.64 per barrel, they said in a December report.

(Reporting by Florence Tan and Siyi Liu in Singapore; Editing by Christian Schmollinger and Kate Mayberry)