Oil rallies as Saudi Arabia and Russia cut exports

Oil rose on Monday after top exporters Saudi Arabia and Russia announced supply cuts for August, overshadowing concern over a global economic slowdown and the potential for further increases to US interest rates.

Saudi Arabia on Monday said it would extend its voluntary cut of one million barrels per day (bpd) for another month to include August, the state news agency said.

Russia, meanwhile, will reduce its oil exports by 500,000 bpd in August, Deputy Prime Minister Alexander Novak said on Monday, further tightening global supplies.

Brent crude futures were up $1.04 at $76.45 a barrel by 0942 GMT after gaining 0.8 per cent on Friday. US West Texas Intermediate crude rose 97 cents to $71.61, having gained 1.1 per cent in the previous session.

"Investors are turning upbeat as the second half of the year kicks off; they expect tighter oil balance and buoyant equities also suggest that recession will be avoided, albeit probably narrowly," said PVM analyst Tamas Varga.

Prices had fallen earlier in the session after eurozone manufacturing activity contracted faster than initially expected in June, with persistent policy tightening by the European Central Bank squeezing finances.

Fears of a further economic slowdown denting fuel demand had grown on Friday as US inflation continued to outpace the central bank's 2 per cent target and stoked expectations it would raise interest rates again.

Higher interest rates could strengthen the dollar, making commodities such as oil more expensive for buyers holding other currencies.

Factory activity growth in China, the world's largest crude importer, also slowed in June as sentiment and recruitment cooled in sluggish market conditions, the Caixin/S&P Global private sector survey showed.