Oil prices were set to post their biggest monthly gains in more than a year on July 31, on expectations that Saudi Arabia will extend voluntary output cuts into September and tighten global supply.
The September Brent contract will expire on July 31. The more active October contract was 89 cents higher at $85.30 a barrel.
Brent and WTI settled on July 28 at their highest levels since April, gaining for a fifth straight week, as tightening oil supplies globally and expectations of an end to U.S. interest rate hikes supported prices.
Both are on track to close July with their biggest monthly gains since January 2022.
Meanwhile, Saudi Arabia is expected to extend a voluntary oil output cut of 1 million barrels per day (bbl/d) for another month to include September.
"There is bull-twitch in the market’s antenna, something which Saudi will most definitely look to aggravate with a roll in their production cut," said PVM analyst John Evans.
"Oil will again enjoy a beginning of the month firmness that it has done for the last three cycles before global economic news comes to keep it in check," he added.
Riyadh's existing cuts have already constrained supplies, with oil inventories beginning to fall in some regions—the United States in particular—as demand outpaces supply.
"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 said in a July 30 note.
The bank estimated that global oil demand rose to a record 102.8 million bbl/d in July and it revised up 2023 demand by about 550,000 bbl/d on stronger economic growth estimates in India and the U.S., offsetting a downgrade for China's consumption.
However, a Reuters poll of 37 economists and analysts on July 31 forecast oil prices to stall this year as high interest rates curb demand, offsetting the impact of OPEC+ production cuts on supply.
The survey predicted front month Brent oil would average $81.95 a barrel in 2023, down from June's $83.03 consensus.
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