On the anticipation that Saudi Arabia would prolong voluntary output cuts into September and tighten global supply, oil prices slipped lower on Monday. However, they were still close to three-month highs and on track to record their greatest monthly gains in more than a year.
By 0632 GMT, Brent crude futures had down 30 cents to $84.69 per barrel, while US West Texas Intermediate crude had fallen 22 cents to $80.36 per barrel.
On Monday, the Brent contract for September will be over.
The more active October contract was down 25 cents at $84.16 per barrel.
Brent and WTI reached their highest settlement levels since April on Friday, rising for a sixth consecutive week as rising US interest rates and tightening global oil supplies bolstered prices.
Their greatest monthly gains since January 2022 are expected for both at the end of July.
“While it seems that crude may have priced in all the good news on US inflation and economic resiliency for the time being, it may continue inching higher still,” said Vandana Hari, the founder of oil market research firm Vanda Insights.
“Most of the strong buying activity has been occurring during the US trading hours; action during the Asian session remains relatively slow and a poor indicator of sentiment,” noted Hari.
Analysts predicted that Saudi Arabia would extend its voluntary 1 million barrel per day (bpd) oil output cut for one more month, to cover September.
At the OPEC+ summit on Friday, Saudi Arabia is anticipated to make this announcement. OPEC+ is a group made up of friends like Russia and the Organisation of Petroleum Exporting Countries, which together produce over 40% of the world’s crude.
“Oil prices are up 18% since mid-June as record high demand and Saudi supply cuts have brought back deficits, and as the market has abandoned its growth pessimism,” Goldman Sachs analysts wrote in a report dated July 30.
“We still anticipate the additional Saudi cut of 1 million bpd to last through September and be reduced by half starting in October.”
The bank kept its December Brent projection at $86 a barrel and projects prices will increase to $93 in the second quarter of 2024.
Oil falls but is still on course for a fifth week of gains.
According to Goldman Sachs, global oil demand reached a new high of 102.8 million bpd in July. Demand for oil is expected to increase by roughly 550,000 bpd in 2023 due to higher-than-expected economic development in the US and India, which will offset a decrease in China’s consumption.
The business forecasts record oil demand this year and next, according to Exxon Mobil CEO Darren Woods, which could help drive up energy prices in the second half of the year.
According to Baker Hughes’ weekly report on Friday, energy companies in the US reduced the number of oil rigs in July by one for the eighth consecutive month, bringing the total to 529.
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