Oil Posts Biggest Monthly Gain Since Early 2022 On Supply Cuts
(Bloomberg) -- Oil posted its largest monthly increase in more than a year on signs that the market is tightening, with analysts estimating that crude demand is running at a record clip just as OPEC+ cuts back production.
Crude futures in New York have now erased their year-to-date losses, with expectations that the Federal Reserve is close to ending its cycle of monetary tightening also aiding sentiment. The US crude benchmark has rallied more than 15% this month, propelling it to the commodity's biggest advance since January 2022.
A reduction of supply from OPEC+ heavyweights Saudi Arabia and Russia has improved the outlook for crude. Earlier this month, Deputy Prime Minister Alexander Novak said Russia will cut crude exports by 500,000 barrels a day in August, and Saudi Arabia also is extending its supply curbs next month. Speculators have been ramping up bullish bets on US crude futures, as well as on key refined products that have also seen their prices surge in recent weeks.
“Record high demand and Saudi supply cuts have brought back deficits,” Goldman Sachs Group Inc. analysts including Daan Struyven and Yulia Zhestkova Grigsby said in a note. “The market has abandoned its growth pessimism.”
Data from China showed manufacturing contracted for a fourth month in July, while non-manufacturing expanded slower than expected. Meanwhile a drop in inventories at the largest US storage hub has supported a widening in the backwardation of WTI's nearest two contracts, a bullish pricing pattern, that is hovering near its largest since November.
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©2023 Bloomberg L.P.
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