Oil prices rose on Monday, extending sharp rises from the end of last week following a decline in US inventories and drilling, while outages and hopes that exporters could freeze output boosted international prices.

Analysts also said that global oil demand could accelerate, helping to tighten a market that has suffered from ballooning oversupply since mid-2014, although weak Asian economic data weighed on markets.

US crude futures rose above $40 a barrel in early trading but eased back to $39.81 a barrel by 0147 GMT, still up 9 cents from their last close.

International benchmark Brent was up 9 cents at $42.03 a barrel.

US energy firms cut oil rigs for a third week in a row to the lowest level since November 2009 as energy firms slash spending. Drillers cut 8 oil rigs in the week to April 8, bringing the total rig count down to 354.

Brent was lifted by production outages in the North Sea and West Africa, and by hopes that a meeting of exporters planned for April 17 would lead to an agreement to rein in ballooning overproduction that sees at least 1 million barrels per day (bpd) pumped in excess of demand.

STRONGER DEMAND?

Analysts at Bernstein said on Monday they expected global oil demand to grow at a mean annual rate of 1.4 per cent between 2016 and 2020, compared with annual growth of 1.1 per cent over the past decade and an International Energy Agency estimate for demand to grow by 1.3 per cent over the next 5 years.

Bernstein said it expected the market to rebalance in the second half of 2016 due to its outlook for stronger than expected demand.

Global demand would reach 101.1 million barrels per day (bpd) by 2020 from 94.6 million bpd at present, it said.

"All net growth will be in non-OECD markets with OECD demand likely to decline by 1 million bpd over the next 5 years."

In a reminder that many economies are still struggling with slow growth, Japan reported on Monday that its core machinery orders fell 9.2 per cent in February from the previous month.

"Things haven't exactly gone according to plan. Japan's economy is sputtering," said Frederic Neumann of HSBC in Hong Kong.

"This is a critical moment for the Bank of Japan. Three years after starting what is arguably the most aggressive easing program among advanced economies, monetary officials have little to show for it," he added.

In China, producer prices in March fell 4.3 per cent from a year earlier, implying slow demand. – Reuters