Dear clients,
Oil prices fell on Monday but were near three-month highs and poised for their biggest monthly rise in more than a year on expectations that Saudi Arabia will extend voluntary production cuts until September and reduce global supply.
Brent crude futures were down 45 cents to $84.54 a barrel by 03:15 GMT, while U.S. West Texas Intermediate was at $80.25 a barrel, having lost 33 cents.
The September Brent crude contract expires later on Monday. The more-active October contract was at $84.23 a barrel, down 18 cents. On Friday, Brent and WTI crude prices settled at their highest levels since April and rose for the fifth week in a row, as a reduction in global oil supply and expectations of an end to US interest rate hikes supported prices. By the end of July, both indicators will reach their highest monthly gains since January 2022.
The International Energy Agency and the Organisation of the Petroleum Exporting Countries (OPEC) expect oil demand to outstrip supply this year, leading to an overall 400,000-500,000 barrels per day (bpd) decline in inventories, mostly in the second half of the year. The decrease in inventories so far has been geographically uneven, with drops in the US and Europe offset by increases in China and Japan.
At the same time, Saudi Arabia is expected to extend its voluntary 1 million bpd oil production cut for another month, including September, analysts said.
„Oil prices have risen 18% since mid-June as record strong demand and Saudi supply cuts have led to a rebound in the deficit and the market has abandoned its growth pessimism,“ Goldman Sachs analysts said in a 30 July note.
„We continue to expect Saudi Arabia’s additional 1 million bpd supply cut to last through September and halve from October.“
The bank maintained its forecast for Brent crude at $86 a barrel for December and expects prices to rise to $93 in the second quarter of 2024.
Goldman Sachs estimates that global oil demand rose to a record 102.8 million bpd in July and was revised upward by about 550,000 bpd for 2023 due to higher economic growth estimates in India and the US, offsetting a downgrade in China’s consumption forecast.
