By Adedapo Adesanya
The oil market rallied on Monday and touched its highest point since January 2022, supported by signs of tightening global supply and rising demand through the rest of this year.
Brent crude futures rose $1.02 or 1.2 per cent to settle at $85.43 a barrel, while the US West Texas Intermediate (WTI) crude futures rallied $1.22 or 1.5 per cent to $81.80 a barrel.
Support came as Saudi Arabia is expected to extend a voluntary oil output cut of 1 million barrels per day for another month, including September. It had initially been planned for July and August.
This is coming as Saudi output fell by 860,000 barrels per day in July, while total production from the Organisation of Petroleum Exporting Countries (OPEC) was 840,000 barrels per day lower.
According to Reuters, OPEC oil output fell in July after supply cuts in Nigeria joined Saudi Arabia’s additional voluntary cut as part of the wider OPEC+ producer group’s latest agreement to support the market.
In the month, Shell Nigeria suspended loadings of Forcados crude due to a potential leak at the export terminal, while Libyan output edged lower due to a brief stoppage at some fields due to a protest.
OPEC’s output is still undershooting the targeted amount by almost 1 million barrels per day, partly because Nigeria and Angola lack the capacity to pump as much as their agreed level.
Russia has pledged a 500,000 barrels per day cut to August oil exports, and signs suggest Russian crude shipments are already falling.
On the other hand, demand is resilient and headed for a record high in the coming months.
According to analysts including Goldman Sachs and oil executives, including ExxonMobil’s CEO, Mr Darren Woods, the world will see a record-high demand for oil this year.
Goldman Sachs estimated that global oil demand rose to a record 102.8 million barrels per day in July. It revised 2023 demand by about 550,000 barrels per day on stronger economic growth estimates in India and the US, offsetting a downgrade for China’s consumption.
The macroeconomic sentiment has also improved, with the recent inflation data from the US showing slowing price increases and China expected to support its economy out of the slower-than-expected growth in the second quarter.
