Crude oil prices rose Monday, on track for the biggest monthly gains in over a year on expectations of a further tightening in supply as well as U.S. growth optimism.
By 09:05 ET (13.05 GMT), the U.S. crude futures traded 0.8% higher at $81.26 a barrel, while the Brent contract climbed 0.7% to $85.00.
Both contracts are on track to close July with gains of approaching 15%, their biggest monthly gains since January 2022.
Sentiment boosted by supply cut expectations
These strong monthly gains were prompted by a couple of the world’s biggest oil exporters, Saudi Arabia, and Russia, announcing plans to further reduce their production levels, starting in August, reducing global supply.
“Market expectations of an extension of the supply cut by Saudi Arabia remain supportive of oil prices in the immediate term,” analysts at ING said, in a note.
Riyadh’s existing cuts have already constrained supplies, with oil inventories beginning to fall in some regions – the United States, in particular.
Goldman lifts 2023 global oil demand forecast
Adding to the bullish sentiment was a growing belief that some of the biggest consumers in the world can avoid dramatic growth slowdowns this year despite aggressive monetary policy tightening.
Data released earlier Monday showed that the eurozone returned to growth in the second quarter of 2023. This followed the U.S. economy growing more than expected in the second quarter, data showed last week, and U.S. Federal Reserve revising its expectation that the world’s largest economy will fall into recession.
Goldman Sachs revised up its global oil demand forecast for the year, to an all-time high of 102.8 million barrels per day in July, and expected solid demand driving a larger-than-expected 1.8 million barrels a day deficit in the second half this year.
Survey suggests oil prices stall
This optimism isn’t universal.
A Reuters survey of 37 economists and analysts suggested that oil prices will stall this year as weak economic growth, on the back of a severe tightening of monetary policy, is expected to curb demand.
The poll forecasts Brent crude would average $81.95 a barrel in 2023, down from June’s $83.03 consensus and current levels of around $85.