Oil is headed for its largest monthly increase in more than a year on signs the market is tightening, with estimates that crude demand is running at a record clip just as OPEC+ cuts back production.
West Texas Intermediate traded slightly higher, above US$80 a barrel, touching the highest since April. The U.S. crude benchmark has rallied almost 14 per cent this month, putting it on course for the biggest advance since January 2022. It’s the best performance for July in almost two decades.
“Record high demand and Saudi supply cuts have brought back deficits,” Goldman Sachs Group Inc. analysts including Daan Struyven and Yulia Zhestkova Grigsby said in a note that reaffirmed a forecast for Brent at $86 a barrel by December. “The market has abandoned its growth pessimism.” Oil’s string of advances mean futures in New York have erased their year-to-date losses, with expectations that the Federal Reserve is close to ending its cycle of monetary tightening also aiding sentiment as the dollar weakens.
A reduction of supply from OPEC+ linchpins Saudi Arabia and Russia has improved the outlook for crude. Earlier this month, Deputy Prime Minister Alexander Novak said Russia will cut crude exports by 500,000 barrels a day in August, with Saudi Arabia also extending its supply curbs next month. Speculators have been ramping up bullish bets on US crude futures, as well as key refined products, prices for which have also been surging in recent weeks.
Data from China showed manufacturing contracted for a fourth month in July, while non-manufacturing expanded slower than expected. Officials from the National Development and Reform Commission and other ministries will hold a briefing later Monday to outline measures to expand consumption.
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