Oil prices rose to multi-month highs on Monday, nearing $79 per barrel for WTI at 2:30 p.m. ET. Brent crude traded at $82.66 per barrel, marking a nearly 2% increase, reaching levels not seen since mid-April as the market tightens.
Despite the expected rate hike by the U.S. Fed, which may have the potential to slow economic growth and reduce oil demand, it is likely to be temporary. This is countered by OPEC’s production quota cuts, a renewed hope for stimulus measures in China, and an increase in U.S. gasoline demand. U.S. gasoline prices are also on the rise, according to AAA data. Some analysts suggest that the rate hike has already been factored into oil prices.
At 2:30 pm ET, WTI crude was trading at $78.71 per barrel, showing a $1.69 increase (+2.19%) on the day.
The additional cuts to OPEC’s production quotas, particularly by Saudi Arabia, have changed the market outlook for H2 2023. Analysts, such as Goldman Sachs, have issued new oil price forecasts, projecting prices to reach $86 per barrel. This is attributed to record-high oil demand and lowered supply, which will result in significant deficits of nearly 2 million bpd in H2 2023, according to Goldman’s analysis on Monday.
Over the past two weeks, Russia’s crude oil exports have been trending downwards, while Saudi Arabia is expected to cut crude oil production in July and August compared to June levels. Exports are already starting to decline, and Strategic Petroleum Reserve (SPR) draws in the United States are no longer propping up U.S. inventories.
Despite the tightening supplies, even the International Energy Agency (IEA), known for advocating green energy, forecasts that global oil demand will rise by 2.4 million bpd this year.
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