Oil continues to benefit from US strategic reserve acquisitions

Oil prices gained on Monday, extending gains for a second session, as U.S. efforts to replenish strategic reserves provided some support, despite continued concerns about oil oversupply and weaker fuel demand growth next year.

Brent crude prices were up 0.6%, or 48 cents, to $76.32 a barrel at 0406 GMT, while West Texas Intermediate crude futures were up 0.5%, or 38 cents, to $71.61 a barrel.

Both contracts rose more than 2% on Friday, but fell for the seventh week in a row, their longest stretch of weekly drops since 2018, due to persistent oversupply fears.

The recent price drop sparked interest from the United States, which has requested up to 3 million barrels of petroleum for the Strategic Petroleum Reserve (SPR) for delivery in March 2024.

"We know the Biden Administration is in the market looking to refill the SPR, which will provide support," IG analyst Tony Sycamore said in a note, adding that technical chart indicators were also supporting prices.

Despite the Organisation of Petroleum Exporting Countries and its partners, known as OPEC+, promising to cut 2.2 million barrels per day (bpd) of output in the first quarter, investors remain doubtful that supply will be reduced. Non-OPEC output increase is expected to result in excess supplies next year.

RBC Capital Markets anticipates 700,000 bpd in stock withdrawals in the first half but only 140,000 bpd for the full year.

"Prices will remain volatile and directionless until the market sees clear data points pertaining to the voluntary output cuts," RBC analysts wrote in a note to clients.

With cuts not taking effect until next month and country-level output statistics due after January, analysts predict a tumultuous two months before there is preliminary clarity on quantifiable data on compliance.

China's latest consumer price index data revealed mounting deflationary pressures as poor domestic demand put doubt on the country's economic recovery.

Chinese officials promised on Friday that they will boost domestic demand and consolidate and strengthen the economy in 2024.

This week, investors will be looking for information on interest rate policies from five central banks, including the Federal Reserve, as well as statistics on US inflation to see how they affect the global economy and oil demand.