A Shell customer selects gas at a Shell gas station in Menlo Park, California, Monday. Oil prices rebounded Monday from early declines to settle at a 10-month high. - Reuters

Oil prices rose to 10-month highs above US$72 on Monday on expectations that recovering refinery operations in the United States and ongoing supply restrictions will cut into global oil inventories.

Analysts expect weekly U.S. oil data on Thursday to show a decline in crude oil inventories as more U.S. refineries resume operations after an unusually long and extensive spring maintenance season.

ConocoPhillips began a restart of a gasolene-making unit at a Texas refinery Friday, while one of two shut crude units at a BP refinery in Indiana will reach full rates within two to three weeks.

London Brent crude, currently a better indicator of global oil market fundamentals than U.S. crude, rose US$1.22 to settle at US$72.63 per barrel, the highest level since August. U.S. crude also reached a 10-month high, rising US$0.41 cents to US$71.09.

Rising demand

Oil output disruptions in Nigeria and supply cuts by the Organisation of the Petroleum Exporting Countries (OPEC) have helped Brent climb 17 per cent this year.

"U.S. crude oil stocks will draw in the next two months as there is little room to build further and as refineries increase their intake," said Olivier Jakob, analyst at Petromatrix.

The International Energy Agency warned on Monday that crude oil demand from refineries would rise sharply in the coming weeks and repeated its call for OPEC to increase oil production. OPEC is not due to meet until September and Saudi Arabia and other OPEC members want global oil inventories to fall from their current levels before they increase production, a Gulf official familiar with the kingdom's policies told Reuters on Monday.

"Stocks are at their highest in nine years," the Gulf official said. "It is really too early to predict what will happen in September."

U.S.crude oil futures have been trading at an atypical discount to Brent since February amid high stocks of crude oil at Cushing, Oklahoma, the delivery point for U.S. crude futures and other inland markets.

The restart of several Midwestern refineries has helped reduce the supply overhang at Cushing, spurring traders to close the gap between Brent and U.S. crude last week.

However, the shutdown of a refinery in Kansas that is supplied from Cushing pushed the discount back over $1.50 per barrel on Monday.

Coffeyville Resources shut a 108,000 bpd refinery in Coffeyville, Kansas, over the weekend after severe flooding. No restart time for the refinery has been given.

- Reuter