Oil prices experienced their most substantial monthly surge in more than a year, fuelled by signs of a tightening market and record-high crude demand. Analysts estimate that global crude demand is running at an all-time high, coinciding with OPEC+ cutting back production.
Crude futures in New York have successfully wiped out their year-to-date losses, buoyed by growing expectations that the Federal Reserve is nearing the end of its cycle of monetary tightening, which has also positively impacted market sentiment. This surge has propelled the US crude benchmark to a more than 15 per cent rally this month, marking the commodity's most significant advance since January 2022.
As of 4:24 pm in New York, US crude was 1.6 per cent higher, reaching $81.86 a barrel, while Brent crude gained 0.7 per cent to $85.56.
The reduction in supply from key OPEC+ players, such as Saudi Arabia and Russia, has significantly improved the outlook for crude oil. In August, Russia will cut crude exports by 500,000 barrels a day, as confirmed by Deputy Prime Minister Alexander Novak. Furthermore, Saudi Arabia is also extending its supply curbs into the next month.
Amidst the market's optimism, speculators have been ramping up bullish bets on US crude futures and key refined products that have also experienced price surges in recent weeks.
Goldman Sachs Group analysts, including Daan Struyven and Yulia Zhestkova Grigsby, expressed their positive outlook, stating that "record high demand and Saudi supply cuts have brought back deficits," leading the market to abandon its growth pessimism.
While China's manufacturing activity contracted for the fourth consecutive month in July, and non-manufacturing expanded slower than expected, a drop in inventories at the largest US storage hub supported a widening in the backwardation of US oil's nearest two contracts. This bullish pricing pattern is hovering near its largest since November, further contributing to the surge in oil prices.
As the market tightens and demand remains robust, oil prices continue to see an upward trajectory, closing the month on a high note and boosting confidence in the global energy sector.
