- Oil trades above $80/Bbl for the first time since April, with supply tightness in focus
- September ’23 WTI gained $1.17 this morning to trade around $79.95/Bbl
- US GDP rose at a 2.4% annualized rate after a 2% pace in the previous three months, beating analyst expectations for 2Q
- Additionally, there’s growing speculation that the Fed is nearing the end of its monetary tightening cycle after the 25-bp rate hike on Wednesday
- Crude has broadly rallied for the past four weeks, buoyed by Saudi and Russian output cuts, and pledges by China to strengthen its economy
- Saudi Arabia expected to extend oil production cuts (Bloomberg)
- Out of 22 traders, analysts, and refiners surveyed by Bloomberg, 15 expect Saudi Arabia to prolong its 1 MMBbl/d production reduction into September
- The implemented cuts seem to be effective, with Brent prices rising nearly 12% in the past month to around $83/Bbl
- IEA forecasts a 1.7 MMBbl/d supply deficit for 2H 2023, and the kingdom would want to see a sustained rise toward $90/Bbl and potential improvement in Chinese economic data before unwinding the cuts, according to Tamas Varga from PVM Oil Associates
- Global oil shortage set to expand, forecasts UBS (Bloomberg)
- UBS forecasts a growing oil deficit, expecting an increase from 0.7 MMBbl/d in June to about 2 MMBbl/d in July and August in a July 27 note to clients
- The bank added that even if Saudi extends or halves its voluntary cuts, the September oil deficit would still exceed 1 MMBbl/d
- Crude demand is driven by Asia, notably China and India, with continued strong demand from Brazil and the Middle East