By Ron Bousso
LONDON (Reuters) - Oil rose towards $66 a barrel on Monday after China moved to bolster its flagging economy, raising hopes that the world's top energy consumer would help absorb a global supply glut.
China cut interest rates for the third time in six months on Sunday to stoke its sputtering economy, which is headed for its worst year in a quarter of century.
Data on Friday showed China ahead of the United States as the world's top oil importer in April, as the Asian economy seized on lower crude prices to stock up.
Brent crude
Analysts talk of a growing disconnect between the futures market, which has gained more than 40 percent since its January low, and a growing physical supply glut.
"The market is pretty much ahead of itself as the overall outlook is still bearish," said Commerzbank analyst Eugen Weinberg.
Investors will be looking at this week's monthly report from the International Energy Agency to see if falling oil prices have boosted global demand for oil, Weinberg said.
In a sign that the market is responding to the recent price gains, U.S. drillers added rigs to the Permian basin for the first time this year after weeks of idling rigs.
Overall, the number of active oil rigs declined for the 22nd week in a row, but the rate of decline has slowed in recent weeks.
"While we expect a cyclical recovery in Brent over the next few years, we are not bullish near term," Morgan Stanley analysts said in a note. "If prices recover too quickly, investment could return and undermine the recovery."
Brent's four-week advance to hit 2015 highs halted late last week as excess European and African crude supply dragged prices down, with a rally technically exhausted.
In Libya, oil production remained volatile after a protest closed the Nafoura oilfield, cutting output at Libya's Arabian Gulf Oil Co (AGOCO) by some 35,000 barrels per day (bpd).
(Additional reporting by Florence Tan in Singapore; Editing by Christopher Johnson)
