Worldwide markets have tightened as the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, has been withholding supplies since 2017 in order to push up oil prices. "Oil has scope to appreciate this week on the back of OPEC output cuts, heightened geopolitical tensions, and optimism over stronger global oil demand".
This decline is largely due to an Opec-led supply cut deal put in place since the beginning of past year to help stabilize prices, coupled with growing demand in Asia.
"With China's robust economy anticipated to drive oil demand this year, oil prices could remain supported in the near term", he said.
Oil reached $78.28 a barrel on Monday, the highest since November 2014, after the OPEC report was published.
OPEC will discuss whether the production caps should be adjusted at a meeting next month.
But oil ministers have since said other metrics should be considered such as oil industry investment, suggesting they are in no hurry to end supply cuts.
USA crude is trading at a hefty discount to Brent, the global marker, thanks to sharp rises in US production to 10.7 million barrels per day, which has left the American domestic oil market well supplied.
Figures reported directly from OPEC members showed even deeper declines in production.
Top exporter Saudi Arabia told OPEC it cut output by 39,000 bpd to 9.868 million bpd, which is the lowest since the supply cut deal began, based on figures Riyadh reports to the group.
The number of rigs drilling for oil in the USA rose by 10 last week to 844 rigs, the highest in more than three years. After the deal the production grew again and Iran had hoped to grow their output to around 4.7m barrels per day over the next four years.
Opec also revised its estimate of non-Opec supply growth in 2018, increasing it by 10,000 bpd to 1.72 million bpd.
OPEC has forecast an increase in global demand for oil this year, revising last month's growth outlook due to better-than-expected economic data from Asia - particularly in India - and Latin America.
U.S. shale oil production is expected to rise by about 145,000 bpd to a record 7.18 million bpd in June, the U.S. Energy Information Administration said on Monday.
The chief executive of Sun Global Investment Mihir Kapadia said: "Oil markets have been cautious as the current impact of the U.S. sanctions on Iran remain unclear, with European and Asian allies continuing to resist Trump's call to pull out of the JCPOA".
Organization of the Petroleum Exporting Countries signalled the group and its allies were ready to step in should "geopolitical developments" impact supply.
Some market participants believe energy stocks will show more responsiveness to oil's rally.