Oil prices end July with best monthly performance since Jan 2022

August 01, 2023 (MLN): Oil prices recorded the largest monthly gain since January 2022, with Brent Crude gaining 13.49% and WTI gaining 15.71% on output cuts by top producers and a strong demand outlook in the United States, the world's biggest fuel consumer.

Brent crude is currently trading at $85.03 per barrel, down by 0.18% on the day.

While West Texas Intermediate crude (WTI) is trading at $81.25 per barrel, down by 0.28% on the day.

To note, oil prices traded near a three-month high on Monday.

"Oil prices may face a correction risk as the markets may have been overbought in the past month. However, a softened U.S. dollar and China's policy optimism may continue to provide bullish factors to crude futures," said Tina Teng, an analyst at CMC Markets, as Reuters reported.

"Signs of a soft-landing U.S. economy has also improved oil's demand outlooks," Teng added.

Chinese authorities released additional policy guidelines on Monday though without concrete measures to boost its economy and domestic consumption, after manufacturing activity fell for a fourth month in July.

A private sector survey also showed on Tuesday that China's factory activity swung to contraction in July, with supply, demand, and export orders all deteriorating amid sluggish market conditions.

National Australia Bank (NAB) analysts expect oil prices to hit 2023 price highs ahead of this Friday's ministerial meeting of the Organization of Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+.

"The OPEC meeting this Friday is a potential catalyst for the outlook where we expect Saudi Arabia's voluntary supply cuts to be extended another month," NAB said in a Tuesday note.

In June, OPEC+ agreed on a broad deal to limit oil supply into 2024, and Saudi Arabia pledged an additional voluntary cut of 1 million barrels per day for July. On July 3, Saudi Arabia said the cut would include August, adding that it could be extended further.

The data showing the supply cuts coincided with U.S. figures released on Monday showing fuel demand rose to 20.78 million bpd in May, the highest since August 2019.

The data from the Energy Information Administration also showed gasoline demand, expressed as product supplied to the market, surged to 9.11 million bpd, the highest since June 2022.

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