By Alex Lawler

LONDON (Reuters) -Oil prices edged up on Monday, buoyed by hopes of rising fuel demand this summer, though gains were capped by a strengthening of the dollar on receding expectations of imminent cuts to U.S. interest rates.

Goldman Sachs analysts expect Brent to rise to $86 a barrel in third quarter, saying in a report that solid summer transport demand will push the oil market into a third-quarter deficit of 1.3 million barrels per day (bpd).

futures gained 16 cents, or 0.2%, to $79.78 a barrel by 0950 GMT. U.S. West Texas Intermediate crude futures were up 6 cents at $75.59.

“We believe current market positioning is overly pessimistic, considering that we expect larger oil inventory declines over the next few weeks,” UBS analysts said in a report.

Oil last week posted a third straight weekly loss on concerns that a plan to unwind some production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, from October will add to rising supply.

Despite the OPEC+ cuts, oil inventories have risen. stocks rose in the latest week, as did gasoline stocks. Energy consultancy FGE also expects oil to rally, with prices reaching the mid-$80s into the third quarter.

“We continue to expect the market to firm up,” FGE said. “But it will likely need a convincing signal of tightening from preliminary inventory data.”

A strong dollar weighed on the market, with the currency rallying after Friday’s U.S. jobs data prompted investors to trim expectations for interest rates. [USD/]

The euro, meanwhile, fell after French President Emmanuel Macron called a snap parliamentary election.

A stronger U.S. currency makes dollar-denominated commodities such as oil more expensive for holders of other currencies.