Oil prices hit multi-month highs on tightening supply

Brent crude oil price news: Oil prices rallied to a fresh three-month high on Monday and recorded their steepest monthly gains since January 2022, supported by signs of tightening global supply and rising demand through the rest of this year. More actively traded October Brent crude futures rose $1.02, or 1.2 per cent, to settle at $85.43 a barrel. The September Brent contract, which expired at settlement on Monday, rose 0.7 per cent to close at $85.56 a barrel.

U.S. West Texas Intermediate crude futures rallied $1.22, or 1.5 per cent, to $81.80 a barrel. Both Brent and WTI hit their highest since late April for a third consecutive session on Monday, after notching their fifth straight weekly gains on Friday. Saudi Arabia is expected to extend a voluntary oil output cut of 1 million barrels per day (bpd) for another month to include September. Saudi output fell by 860,000 barrels per day (bpd) in July, while total production from the Organization of Petroleum Exporting Countries was 840,000 bpd lower, a Reuters survey found on Monday.

"Crude prices are finishing a solid month on a high note as demand prospects remain impressive and no one doubts that OPEC+ will keep this market tight," OANDA analyst Edward Moya said.

Oil inventories are beginning to drop elsewhere too, especially in the U.S., where the government has started refilling the Strategic Petroleum Reserve from its lowest level in multiple decades. Five analysts polled by Reuters on Monday estimated on average that U.S. crude inventories fell by about 900,000 barrels in the week to July 28.

"After the end of SPR releases and recession fears and a liquidity drain due to bank stability fears, which caused the markets to ignore a looming supply squeeze, the coming supply deficits are getting too big to ignore," Price Futures Group analyst Phil Flynn said.

Goldman Sachs estimated that global oil demand rose to a record 102.8 million bpd in July and it revised up 2023 demand by about 550,000 bpd on stronger economic growth estimates in India and the U.S., offsetting a downgrade for China's consumption.