Oil prices hovered near three-month highs on Monday, poised to record their most significant monthly gains in over a year. The surge in prices is driven by expectations that Saudi Arabia will extend voluntary output cuts into September, leading to a tightening of global supply.
Brent crude futures dipped slightly to $84.90 a barrel, and US West Texas Intermediate crude was at $80.41 a barrel, as reported by Reuters. Brent and WTI settled at their highest levels since April on Friday, marking the fifth consecutive week of gains, supported by tightening oil supplies worldwide and expectations of a halt in US interest rate hikes.
Both Brent and WTI are on track to end July with their most substantial monthly gains since January 2022. Analysts predict that Saudi Arabia will extend its voluntary oil output cut of 1 million barrels per day (bpd) for another month, covering September.
Goldman Sachs analysts noted that oil prices have risen by 18% since mid-June due to strong demand and Saudi supply cuts, which have reduced deficits in the market. The bank expects the additional 1 million bpd Saudi cut to continue through September and be halved from October. Goldman Sachs maintains its Brent forecast at $86 a barrel for December and projects prices to rise to $93 in the second quarter of 2024.
Global oil demand is estimated to have reached a record 102.8 million bpd in July, with 2023 demand revised upward by approximately 550,000 bpd due to stronger economic growth estimates in India and the US, offsetting a consumption downgrade for China.
