Oil prices rise on expectations of further output cuts by Saudi Arabia

July 31, 2023 (MLN): Oil prices continued the upward trajectory on Monday amid supply concerns on expectations that Saudi Arabia will extend voluntary output cuts of 1 million barrels per day (bpd) into September.

Brent crude is currently trading at $84.95 per barrel, up by 0.73% on the day.

While West Texas Intermediate crude (WTI) is trading at $81.09 per barrel, up by 0.83% on the day.

Oil prices are on track to close the month of July at their biggest monthly gains in more than a year.

"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, as Reuters reported.

"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 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.

Adding to the bullish sentiment was data on Monday that showed that the eurozone returned to growth in the second quarter of 2023, after narrowly avoiding a technical recession around the turn of the year.

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