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Peter Davis

An writer at FOMOdrive

  • Aug 02, 2023
  • 2 min read

Oil prices soared by 13%

In July, Brent oil prices experienced a dramatic increase of 13%.

The month that has just ended may have been the best one in the last year and a half.

On Monday, Brent oil prices exceeded $85 per barrel for the first time since April. This marks the first time in a month that prices have risen so significantly since October of last year, and the monthly increase could be the highest since January 2022, when prices increased by more than 14%.

Investors in the markets are rejoicing due to the decrease in inflation indicators, which implies that central banks will soon shift to a more accommodative policy, thus boosting global demand for commodities.

The FxPro analyst team noted that oil consumption had reached unprecedented levels, resulting in a supply-demand imbalance in July. Furthermore, they highlighted the positive impact of the US employment growth and China's stimulus measures on economic growth.

RBC reports that prices have been rising due to the heightened tensions between Russia and Ukraine, which has brought about new risks for the supply of Russian raw materials. Additionally, the market has been impacted by the decrease in production from Saudi Arabia.

Starting on July 1, Saudi Arabia implemented a voluntary cutback of 1 million barrels per day (b/d) in production for a two-month period of July and August. Additionally, Russia declared a restriction of 500,000 bpd in oil exports.

The potential failure of the grain deal could lead to a shortage of ethanol, resulting in an increased demand for petroleum products to substitute biofuels.

Recently, oil prices have been bolstered by the expectation that Saudi Arabia will extend its voluntary production cut into September, which would lead to a decrease in global supply, according to Reuters. The OPEC+ meeting on Friday may reveal whether the Kingdom will extend the cut or not.

National Australian Bank predicts that oil prices will continue to rise due to supply shortages and reduced supplies from OPEC, as well as expectations of additional economic stimulus in China during the third quarter.

Goldman Sachs has not altered their prediction that Brent oil prices will be $86 per barrel by the end of this year, and will reach $93 in the second quarter of 2024.

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