Oil prices dipped slightly on Monday but are on track for their largest monthly rise since July 2021 as anticipated production cuts in September threaten to tighten global supply.
Brent crude fell 0.42% to $84.57 a barrel while West Texas Intermediate (WTI) crude lost 0.14% to $80.44 a barrel on Monday morning. However, both benchmarks are much higher than at the beginning of July. Brent has gained $9.75 per barrel this month, while WTI is up $9.50.
Oil prices have been recovering in recent weeks from a downward trend in late April and early May. The rebound came after OPEC+ surprised markets with output cuts in April, though prices fell again shortly after. Both Brent and WTI surged again following Saudi Arabia's additional output cut last month as part of OPEC+'s deal to extend production reductions into 2023. However, prices again pulled back days later.
Analysts now expect Saudi Arabia to extend its voluntary cut of 1 million barrels per day into September, which could provide further support for prices. Goldman Sachs also revised up its oil demand forecast while maintaining its $93 Brent price target for the next 12 months.
While crude may have "priced in all the good news" for now, prices could continue to inch higher due to low Asian trading activity and expectations of tightening supply, said Vandana Hari of Vanda Insights. Outlook for oil has improved since OPEC+'s output cut announcements, with WTI breaking above key resistance levels last week, suggesting an end to the downtrend of the past year. However, oil will likely remain rangebound for now, rejecting economic realities until fundamentals ultimately prevail.
