UPDATE 8-Oil prices rise 3% on signs of U.S. economic recovery

* Wall Street surges after record rise in May retail sales
* Oil demand forecast at 91.7 mln bpd for 2020 - IEA
* OPEC+ compliance with cuts in May at 89% - IEA
* POLL-U.S. crude inventories projected to ease off record
peak
* Coming Up: API's weekly U.S. oil data at 4:30 p.m.
EDT/2030 GMT

(Updates to settlement, adds latest forecast for U.S. crude
stockpiles)
By Devika Krishna Kumar
NEW YORK, June 16 (Reuters) - Oil prices rose 3% in volatile
trade on Tuesday as Wall Street surged and the International
Energy Agency (IEA) increased its oil demand forecast for 2020,
but gains were capped by worries about a second wave of
coronavirus cases.
Brent crude futures LCOc1 ended the session up $1.24, or
3.1%, at $40.96 a barrel while U.S. West Texas Intermediate
crude (WTI) CLc1 rose $1.26, or 3.4% to settle at $38.38 a
barrel.
Oil prices were bolstered early in the session as U.S.
stocks opened higher after a record increase in May retail sales
revived hopes of a swift post-pandemic economic rebound, with
sentiment also lifted by data showing reduced COVID-19 death
rates in a trial of a generic steroid drug.
In its monthly report, the IEA forecast oil demand at 91.7
million barrels per day (bpd) in 2020, 500,000 bpd higher than
its estimate in May's report, citing higher than expected
consumption during coronavirus lockdowns. Still, the agency said a fall in flying because of the virus
outbreak meant the world would not return to pre-pandemic demand
levels before 2022.
Gains were limited as coronavirus cases rose to more than 8
million worldwide this week, with infections surging in Latin
America, while the United States and China are dealing with
fresh outbreaks. China sharply ramped up restrictions on people leaving
Beijing on Tuesday in an effort to stop the most serious
coronavirus flare-up since February from spreading to other
cities and provinces. A full U.S. economic recovery will not occur until the
American people are sure that the epidemic has been brought
under control, Federal Reserve Chair Jerome Powell said.
"In the last two weeks oil traders priced in two big ‘ifs.'
How supply will evolve and the fear of the pandemic's second
wave," said Bjornar Tonhaugen, Rystad Energy's head of oil
markets.
"If the world treats a second Covid-19 wave like in the
first half of the year, then we are in for a demand reduction
that was not in the initial planning."
Oil supplies in May plunged by nearly 12 million bpd, the
IEA said, with the Organization of the Petroleum Exporting
Countries and its allies including Russia - a group known as
OPEC+ - reducing their output by 9.4 million bpd.
That means OPEC+ hit 89% compliance with agreed cuts in May,
the IEA said.
OPEC+ agreed this month to extend production cuts of 9.7
million bpd through July. It also called on members that have
not been complying to make up commitments with extra cuts later.
Iraq, which had one of the worst compliance rates among the
major producers, has already made deep cuts to its crude
supplies to Asia in July. U.S. shale producers are also reducing drilling in response
to the collapse in oil prices with production from seven major
formations likely to drop to close to a two-year low of 7.63
million bpd by July, the Energy Information Administration said
on Monday. U.S. crude stockpiles likely eased from a record high last
week, a Reuters poll showed ahead of weekly reports from the
American Petroleum Institute, an industry group, at 4:30 p.m.
(2030 GMT) and the EIA on Wednesday. EIA/S