Oil prices fell slightly at the Asian market on Monday, but remain near three-month highs on track to record their biggest monthly gains in more than a year, on expectations that Saudi Arabia will extend voluntary production cuts through September and tighten global supplies.
Brent crude futures fell 45 cents to $84.54 a barrel as of 0315 GMT, while West Texas Intermediate crude (WTI) was down 33 cents at $80.25 a barrel.
The September Brent contract expires on Monday. The more active October contract was down 18 cents at $84.23 a barrel.
Brent and WTI gained in the fifth week in a row, hitting their highest levels since April on Friday, as global tightening oil supplies and expectations for an end to US interest rate hikes bolster prices. Both are on track to close July with their biggest monthly gains since January 2022.
While crude oil seems to have priced in all the good news about US inflation and economic resilience for now, it could continue to rise higher.
Most of the strong buying activity occurs during US trading hours; Movement during the Asian session is relatively slow, but not very decisive globally.
Meanwhile, analysts said Saudi Arabia is expected to extend its 1 million barrels per day voluntary oil production cut for another month to include September and halve it in October.
Oil prices have risen 18% since mid-June as increased demand, and supply disruptions led to a product shortage and the market abandoned its pessimism about growth.
The market kept its Brent forecast of $86 a barrel for December and expects prices to test $93 a barrel in the second quarter of 2024.
Global oil demand is estimated to have risen to a record 102.8 million barrels per day in July. Based on stronger economic growth forecasts in India and the US, 2023 demand is expected to be revised upwards by around 550,000 barrels per day, offsetting the decline in China’s consumption.
As a result of the increased demand, a slightly larger than expected deficit is developing in the second half of 2023, with an average of 1.8 million barrels per day, and a modest deficit of 0.6 million barrels per day for 2024 is likely.
Darren Woods, CEO of Exxon Mobil, said he expects record oil demand this year and next, which could help boost energy prices in the second half of the year.
In the U.S., energy firms in July cut the number of oil rigs for an eighth straight month by one to 529, Baker Hughes said on Friday.
