LONDON: Brent crude was heading for its biggest monthly rise in seven years on Friday, touching 2016 highs as a weak dollar and falling U.S. production tempered concerns about an excess of physical oil. A looming rise in Middle East output capped gains, but investor sentiment held the optimism that has helped lift oil futures nearly 80 percent higher than January lows. Brent futures were trading at $48.26 a barrel at 1351 GMT (0951 EDT), up 12 cents from their last close. US crude was up 57 cents at $46.60 a barrel, with both contracts hitting 2016 highs earlier in the session. Investment bank Jefferies said the market “is coming into better balance” and would flip into undersupply in the second half of the year. But others warned that the rally was happening too soon, driven in large part by investors taking speculative positions. “The issue is that we haven’t seen price rallies … correlate with fundamentals,” said Hamza Khan, senior commodity strategist at ING. “The fundamentals – high stocks, high production – haven’t changed.” A Reuters survey showed that OPEC’s oil output rose in April to the highest in recent history as production increases in Iran and Iraq offset outages elsewhere. Deutsche Bank said it expected a rise in production by the Organization of the Petroleum Exporting Countries – due to climbing Iranian output and following outages in Iraq, Nigeria and the United Arab Emirates. Saudi output is expected to edge up by 350,000 barrels to around 10.5 million barrels per day, sources told Reuters, just as tankers filled with unsold oil are at sea seeking buyers. Still, falling production outside OPEC, notably in the United States, raised hopes that the worst of the nearly two-year excess of oil was over. Analysts polled by Reuters raised their average forecast for Brent in 2016 to $42.30 per barrel, the second consecutive month of increases. Bank of America Merrill Lynch said in a note that “non-OPEC oil supply is indeed hanging off a cliff”, and estimated that global output would contract year on year in April or May for the first time since 2013. A weakening dollar also supported oil by making dollar-priced crude cheaper for holders of other currencies. There are growing risks that production in OPEC member Venezuela could decline. Risk consultancy Eurasia Group said the state was running out of cash to keep its oil pumps running. “Mounting problems will probably lead to a decline of 100,000–150,000 bpd this year,” Eurasia Group said.