BENGALURU: Oil prices were set to post their biggest monthly gains in more than a year on Monday, on expectations that Saudi Arabia will extend voluntary output cuts into September and tighten global supply.
More actively traded October Brent crude futures rose 73 cents, or 0.9%, to $85.14 a barrel by 11:32 a.m. EDT (1532 GMT). The September Brent contract, which will expire at settlement on Monday, was trading 0.6% higher at $85.52 a barrel.
US West Texas Intermediate crude futures rose 85 cents, or 1.1%, to $81.43 a barrel.
Brent and WTI settled on Friday at their highest levels since April, gaining for a fifth straight week. Both are on track to close July with their biggest monthly gains since January 2022.
Saudi Arabia is expected to extend a voluntary oil output cut of 1 million barrels per day (bpd) for another month to include September. Saudi’s output curtailment and production outages in Nigeria lowered output from the Organization of Petroleum Exporting Countries (OPEC), a Reuters survey found on Monday.
Supplies are also beginning to tighten in Europe and the US, where the government has begun the process of refilling the Strategic Petroleum Reserve from its lowest level in multiple decades.
“After the end of SPR releases and recession fears and a liquidity drain due to bank stability fears which caused the markets to ignore a looming supply squeeze, the coming supply deficits are getting too big to ignore,” Price Futures Group analyst Phil Flynn said.
Goldman Sachs estimated that global oil demand rose to a record 102.8 million bpd in July and it revised up 2023 demand by about 550,000 bpd on stronger economic growth estimates in India and the US, offsetting a downgrade for China’s consumption.
However, a Reuters poll of 37 economists and analysts on Monday forecast oil prices to stall this year as high interest rates curb demand, offsetting the impact of OPEC+ production cuts on supply.
The survey predicted front-month Brent oil would average $81.95 a barrel in 2023, down from June’s $83.03 consensus.
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