On Monday, U.S. benchmark WTI crude oil prices remained close to three-month highs, despite a slight dip, and are on track to record their largest monthly gains in over a year. This trend is attributed to expectations that Saudi Arabia will continue voluntary output cuts into September, leading to a tightening of global supply. However, most of the strong buying activity is occurring during U.S. trading hours, while action during the Asian session remains relatively slow, which may not be a reliable indicator of overall market sentiment.
Output cuts to be extended by Saudi
Analysts predict that Saudi Arabia will prolong its voluntary oil output cut of 1 million barrels per day (BPD) for another month, covering September. The bank’s forecast for Brent remains at $86 per barrel for December, and it anticipates a price increase to $93 during the second quarter of 2024.
Read more: Oil prices stabilize awaiting FED interest rate decision, US stockpiles report
Record oil demand
According to Goldman Sachs, global oil demand hit a new high of 102.8 million BPD in July. The bank subsequently revised its estimate of oil demand for 2023, increasing it by approximately 550,000 BPD on the basis of stronger economic growth forecasts for India and the United States, which outweighed a downgrade in China’s consumption. The surge in demand has resulted in a slightly larger deficit in H2 2023 than initially expected, averaging 1.8 million BPD, along with a modest deficit of 0.6 million BPD in 2024.
Oil prices reach multi-month highs
Brent and WTI closed last Friday at their highest levels since April, marking their fifth consecutive week of gains. These price increases are due to the tightening of oil supplies globally and expectations of a potential end to U.S. interest rate hikes, which have both supported prices. Currently, WTI is trading at $81.33 per barrel, while Brent is trading at $85.08 per barrel. Both benchmarks are on track to record their largest monthly gains since January 2022. While crude may have already factored in all the positive news regarding US inflation and economic resilience, prices could still continue to rise in the near term.
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