Oil was up 3 percent on Monday as more countries announced they would begin easing coronavirus lockdowns and as crude supply cuts by the world's top producing nations and companies take hold.

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Worldwide fuel demand fell by an estimated 30 percent in April largely due to stay-at-home orders, and weak consumption is expected to overhang the crude market for months, even as major world oil-producers reduce output as of May 1.

However, analysts have said that swift action by those parties could help reduce the supply glut more quickly.

"The market continues to price in the idea that things are improving," Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut.

Brent crude settled at USD 27.20 a barrel, up 76 cents, or 2.9 percent, while US West Texas Intermediate (WTI) crude gained 61 cents, or 3.1 percent, to USD 20.39 a barrel.

"We're supposed to see the production cuts start to show up... the slow restart of not only some of the states here in the US but some of the countries in Europe is beginning to partially alleviate some of the demand fears," McGillian said.

Italy, Finland and several US states were among numerous governments moving to ease lockdown restrictions on Monday to resurrect their economies, but officials cautioned against acting too swiftly as coronavirus cases passed 3.5 million and deaths neared a quarter of a million globally.

In addition to fresh supply cuts that began this month by the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, oil and gas output from some of the world's top oil companies is set to drop in the second quarter of 2020 to levels not seen in at least 17 years.

Goldman Sachs said it is growing more optimistic about the rise of oil prices next year due to lower crude production and a partial recovery in oil demand.

The Wall Street bank raised its 2021 forecast for global benchmark Brent to USD 55.63 per barrel from USD 52.50 earlier. The bank hiked its estimate for WTI to USD 51.38 a barrel from USD 48.50 previously.

The re-emergence of trade tensions between the United States and China limited the rise in prices.

"Demand growth in China is good for the energy market right now, it is pretty much the only game in town" said Bob Yawger, director of energy futures at Mizuho. "Even a verbal scrap with President Trump is not good for China demand growth, considering the fragile circumstances the market is currently operating under."

Adding to US President Donald Trump's threat last week to impose tariffs on China, Secretary of State Mike Pompeo said on Sunday there was "a significant amount of evidence" that the new coronavirus emerged from a Chinese laboratory.

Oil prices recovered some of their losses after US Treasury Secretary Steven Mnuchin said he expected China to make good on its trade agreement with the United States. He also said he expected oil markets to rebound, and that the Trump administration was looking for more storage capacity.

First Published:May 5, 2020 7:10 AM IST