Oil is trading around three-month highs in early trade

1 Aug 2023 , 09:52 AM

On Tuesday, oil prices remained mostly stable, hovering near a three-month high attained on Monday, supported by indications of tighter global supply as producers implement output cutbacks and strong demand in the world’s largest fuel consumer, the United States.

Brent crude futures for October were trading at $85.30 per barrel, showing a marginal decline of 13 cents or 0.15% from the previous day’s closing. On Monday, front-month Brent had settled at its highest level since April 13.

Meanwhile, the price of West Texas Intermediate crude in the United States was $81.69 per barrel, down 0.1% or 11 cents from the previous session’s close, which marked the highest price since April 14.

Market analysts expect that Saudi Arabia might extend its voluntary oil output cut of 1 million barrels per day (bpd) for an additional month, covering September, during a virtual conference with other major producers scheduled for Friday. This move is aimed at providing further support to the market.

In June, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia (OPEC+), reached a comprehensive agreement to reduce oil supplies until 2024, with Saudi Arabia pledging an additional voluntary cut in July. On July 3, Saudi Arabia announced that this cut would extend through August and possibly beyond.

According to a Reuters survey, Saudi Arabia’s output cuts came close to the targeted reduction, with output falling by 860,000 bpd in July, while total OPEC output declined by 840,000 bpd.

These supply-cut figures were in line with US estimates released on Monday, which indicated that petroleum demand surged to 20.78 million bpd in May, reaching the highest level since August 2019. Gasoline demand, measured by product deliveries to the market, also rose to 9.11 million bpd, the highest level since June 2022, according to data from the US Energy Information Administration (EIA).

A Reuters poll forecasted that crude oil and gasoline stockpiles in the United States were likely to have fallen last week, with crude inventories expected to decrease by approximately 900,000 barrels on average for the week ending July 28.

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