Oil edges higher on prospect of tighter supplies

Oil prices nudged higher in early Asian trade on Monday, supported by the prospect of tighter supplies from OPEC+ producers from May, but concerns about the global economic outlook capped gains.

Brent crude futures gained 13 cents, or 0.2 per cent, to $85.25 a barrel by 2356 GMT, while US West Texas Intermediate crude was at $80.84 a barrel, up 14 cents, or 0.2 per cent.

Both contracts rose for a third straight week last week, returning to levels last seen in November, after the Organization of the Petroleum Exporting Countries and their allies surprised investors by announcing more production cuts that will start in May.

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The group known as OPEC+ will be cutting mostly sour crude supplies from Middle East producers.

Following the announcement, top exporter Saudi Arabia raised its May crude prices to term customers in Asia and the United States.

Separately, investors are watching the progress of talks between Iraq and Kurdistan to restart northern oil exports which could bring more sour crude to the global market.

Further supporting prices, the number of US oil rigs fell by two to 590 last week, while gas rigs dropped by two to 158, according to a Baker Hughes Co report on Thursday, a sign that US production won't be rising in the near term.

In global financial markets, the closely watched US inflation report to be released this week could help investors gauge the near-term trajectory for interest rates.

Despite expectations that the Federal Reserve could slow down rate hikes because of the recent banking crisis, borrowing costs could still climb if inflation remains strong, analysts said.

Sharp rate hikes have boosted the greenback, making dollar-denominated commodities such as oil more expensive for investors holding other currencies.