Oil is heading for its biggest monthly gain in more than a year

July 31

Oil prices are heading to record their biggest monthly gains in more than a year, Monday, on expectations that Saudi Arabia will extend voluntary production cuts until September and shrink global supplies.

Oil prices hovered near a three-month high, with Brent crude futures rising 34 cents to $85.33 a barrel, while US West Texas Intermediate crude rose 54 cents to $81.12 a barrel.

The September Brent contract expires Monday. The more active October contract rose 47 cents to $84.88 a barrel.

Brent and West Texas Intermediate settled, on Friday, at their highest levels since April, continuing to achieve gains for the fifth consecutive week, as tightening global oil supplies and expectations of an end to raising US interest rates supported prices.

Meanwhile, Saudi Arabia is expected to extend a voluntary oil production cut of 1 million barrels per day for another month, including September.

market turmoil

“There is turbulence in the market, something that Saudi Arabia will certainly seek to exacerbate as its production declines,” said John Evans, an analyst at PVM.

He added, “Oil will once again enjoy the stability at the beginning of the month that it had in the past three sessions, before global economic news comes to keep it under control.”

Riyadh’s current cuts have already reduced supplies, as oil stocks have begun to decline in some regions, the United States in particular, as demand has outpaced supply.

“Oil prices have risen 18% since mid-June, as record high demand and Saudi supply cuts have pushed back deficits and the market has abandoned growth pessimism,” Goldman Sachs analysts said in a note on July 30.

The bank estimated that global oil demand rose to a record high of 102.8 million barrels per day in July, and adjusted demand for an increase in 2023 by about 550,000 barrels per day, based on stronger estimates of economic growth in India and the United States, which compensated for lower consumption in China.

Adding to the bullish sentiment, Monday’s data showed that the eurozone returned to growth in the second quarter of 2023, after narrowly escaping recession at the start of the year. (Reuters)