Oil prices climbed on Monday afternoon to levels not seen since April, with WTI nearing $79 per barrel at 2:30 p.m. ET.
Brent crude was trading at $82.66 per barrel-up nearly 2% on the day, returning to highs not seen since mid-April as the market tightens.
While the U.S. Fed is expected to raise rates yet again-a factor that has the potential to slow economic growth and reduce oil demand-the raising of rates is likely to be quite temporary, countered by OPEC's production quota cuts, a renewed hope for stimulus measures in China, and an increase in U.S. gasoline demand. U.S. gasoline prices were ticking up as well, according to AAA data. Some analysts are suggesting that a fed rate hike has already been priced into oil.
At 2:30 pm ET, WTI crude was trading at $78.71 per barrel-up $1.69 (+2.19%) on the day.
OPEC's additional cuts to its production quotas-namely via Saudi Arabia-has changed the market outlook for H2 2023, with analysts such as Goldman Sachs issuing new oil price forecasts this week. Goldman now sees oil prices at $86 per barrel on record-high oil demand and lowered supply that will create "pretty sizable deficits" of nearly 2 million bpd in H2 2023, Goldman said on Monday.
Russia's crude oil exports have been trending down over the last two weeks, Saudi Arabia is expected to cut crude oil production in July and August from June levels, with exports already starting to decline, and SPR draws in the United States are now in the rearview and will no longer be propping up U.S. inventories.
While supplies are tightening, even green-energy champion, the IEA, is forecasting that global oil demand will rise by 2.4 million bpd this year.
By Julianne Geiger for Oilprice.com
Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group. More