Oil extended gains on speculation that demand will get a boost from a potential rate cut by the Federal Reserve.

(Bloomberg) -- Oil extended gains on speculation that demand will get a boost from a potential rate cut by the Federal Reserve, while investors await news from the resumption of U.S.

-China trade talks.

Futures advanced as much as 0.8% in New York after climbing the most in almost three weeks on Monday. Later this week, the Fed borrowing costs for the first time in more than a decade. Chinese and American negotiators gather for two days of Tuesday, while U.S. government data on Wednesday is forecast to show crude stockpiles fell for a seventh week.

Oil is still on track for its second monthly decline this year as concerns about the outlook for the global economy dent demand, countering fears crude flows from the Middle East may disrupted amid tensions with Iran. Fed Chair Jerome Powell’s post-meeting press conference Wednesday will give clues to what’s in store for the rest of the year, possibly determining the fate of many developing economies for the coming months.

“The risk of negative rates are growing and a complete pledge to easing should support commodities,” Ed Moya, chief buy Wellhead market strategist at Oanda Corp., said in a note. “If the Fed matches the intensity of rate cuts they delivered in the 90s, we could see crude prices heavily supported.”

West Texas Intermediate for September delivery rose 44 cents to $57.31 a barrel on the New York Mercantile Exchange as at 7:53 a.m. London time. The contract gained 67 cents to close at $56.87 on Monday, climbing 1.8% over the past three sessions.

Brent for September settlement added 52 cents, or 0.8%, to $64.23 a barrel on the ICE Futures Europe Exchange. Futures gained for a third straight day on Monday. The global benchmark crude traded at a $6.91 premium to WTI.

Fed Chair Powell and his Federal Open Market Committee colleagues are interest rates by a quarter percentage point after meeting Tuesday and Wednesday to bolster growth in the economy.

Investors are likely to opt for the sidelines as they await developments on U.S.-China trade, three months after negotiations broke down. Meanwhile, American crude stockpiles are forecast to have contracted by 2.5 million barrels last week in a Bloomberg survey of analysts.

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Ben Sharples