Start of the week witnessed a notable surge in oil prices, marking the most significant monthly gains in over a year. The prevailing anticipation of Saudi Arabia's extension of voluntary output cuts into September, along with tightened global supply, fuelled this bullish trend. Brent crude futures exhibited a slight decline, trading at $84.92 per barrel by 0819 GMT, while U.S. West Texas Intermediate crude saw a marginal uptick, reaching $80.68 per barrel. The September Brent contract was set to expire on that very day, while the October contract displayed a minor increase of 6 cents, hitting $84.47 per barrel In light of the tightening supply situation and the anticipated end to U.S. interest rate hikes, both Brent and WTI were on track to mark their most significant monthly gains since January 2022 by the end of July.
Vandana Hari, the founder of oil market analysis provider Vanda Insights, expressed that while the current crude oil prices might have already factored in the positive aspects of U.S. inflation and economic resilience, there is still potential for further incremental increases. Concurrently, it was widely expected that Saudi Arabia would extend its voluntary oil output cut of 1 million barrels per day (bpd) into September. The existing cuts had already led to supply constraints, with oil inventories starting to deplete in certain regions due to strong demand outpacing supply. Goldman Sachs analysts pointed out that the oil market has undergone significant changes, with oil prices having surged by 18% since mid-June. This was a result of record-high demand and Saudi supply cuts, which reversed deficits and led to the market abandoning its previous pessimism about growth.
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