NEW YORK (Bloomberg) - Oil rose the most in almost three weeks on speculation that demand will get a bump from a potential U.S. Federal Reserve rate cut aimed at spreading economic benefits more broadly.

Futures in New York rose 1.2%, extending last week’s 1% advance. Later this week, the Fed is expected to lower borrowing costs for the first time in more than a decade. Meanwhile, Chinese and U.S. negotiators are set to meet in a bid to resolve a trade war between the world’s top economies. On Wednesday, government data is predicted to show that American crude stockpiles declined for a seventh straight week.

“Markets are holding their breath until Wednesday,” said Phil Streible, senior market strategist at RJO futures. “It will be like the Superbowl of oil. There’s the EIA stockpile numbers that are coming out and the Fed announcement a couple of hours later. If we see a Fed cut and a draw on crude stockpiles, there could be big movement Wednesday on the price of oil.”

Simmering political tensions in the Middle East, which have raised geopolitical risk across the major oil-producing region, are also continuing to support prices. The U.K. has sent one of its Type 45 warships to the Strait of Hormuz, after Iran seized a British tanker, as the U.S. and others seek to build a coalition to protect vessels traversing the crude chokepoint.

Despite the gains, oil is heading for its second monthly loss this year as the long-term outlook for the global economy remains shaky. Hedge funds added to bets on a slump in New York futures at the fastest pace in almost a year, with disappointing manufacturing data out of America and Germany last week bolstering fears of declining demand.

“Demand is soft right now,” said Streible. “The Chinese need to come in and start buying crude oil and we need to see a pickup in demand in the U.S. for the price to rise more.”

West Texas Intermediate for September delivery rose 67 cents to settle at $56.87 a barrel on the New York Mercantile Exchange, the biggest advance since July 10 and its third straight gain. Brent for September settlement climbed 25 cents to $63.71 a barrel on the ICE Futures Europe Exchange. It capped a 1.6% weekly gain on Friday. The global benchmark crude was at a $6.84 premium to WTI.