By Henning Gloystein
SINGAPORE (Reuters) - Oil prices jumped on Monday, extending a rally that has lifted crude by over a third from this year's lows, as tightening supply and an improving global outlook strengthened the sentiment for a market recovery.
Front-month Brent crude futures were trading at $39.30 per barrel at 0655 GMT, up 1.5 percent from their last settlement and over a third higher than their January low, when prices fell to levels not seen since 2003.
U.S. West Texas Intermediate (WTI) futures were trading at $36.55 a barrel, up 63 cents from the last close and 40 percent above February lows.
"It looks at this stage as if it (oil) has formed a little bit of a bottom and perhaps we're going to see a sustained price in the $30s, maybe trending back up to $40 at some point," said Ben Le Brun, market analyst at OptionsXpress.
"The macro picture takes all corners of the globe into account, and those corners seem to be improving ... and that's where I'm seeing the oil price tick higher."
Analysts said that strong U.S. payroll data had pushed markets on Friday and that attention was now shifting to China where the National People's Congress opens its annual session this week.
On the supply side, U.S. energy firms cut oil rigs for an 11th week in a row last week and to the lowest level since December 2009 as producers slash costs.
Beyond a tightening supply outlook, traders said shifting sentiment was also lifting prices as large amounts of short positions were being closed while bets on rising prices increased.
"Speculative positioning has become increasingly bullish in recent weeks, driven by news of substantial upstream capex cuts, frequent talk of an OPEC/non-OPEC output freeze, and bits of positive economic data," Barclays said on Monday.
Ric Spooner, chief market analyst at CMC Markets said "there's a good prospect that Brent could hit $40 ... (it) could easily do it in the next trading session."
Despite the recent price rises and the generally more bullish outlook, analysts warned that the general glut remained in place and prices could still drop back.
"Upside should be limited by bloated global inventories and producer hedging. Moreover, we worry that this latest oil bounce shares many features of the 2Q15 false oil rally," Morgan Stanley said on Monday.
Barclays warned that the recent price rises had "wobbly legs" as they were "not fully supported by fundamentals."
Most analysts still estimate that 1 million to 2 million barrels of crude are produced every day in excess of demand, leaving storage tanks brimming with unsold fuel.
(Additional reporting by Manesha Pereira; Editing by Joseph Radford and Tom Hogue)
