Oil Prices Soars by 16%

Benchmark oil prices have surged 16% in July, positioning the commodity for its best month since January 2022. The recent rally can be attributed to optimism surrounding global economic growth and supply cuts by major oil-producing nations, namely Saudi Arabia and Russia.
West Texas Intermediate (WTI) crude prices have soared by 16% to over $81 per barrel during the month, while the Brent crude benchmark has climbed 13% to just under $85 per barrel. These significant gains indicate that July will be the strongest month for oil prices since the outbreak of the war in Ukraine.
Despite concerns about a global recession earlier this year, the bounceback in July has resulted in year-to-date declines of less than 1% for both WTI and Brent crude. This reflects a shift in market sentiment, with fears of a recession subsiding.
Several factors have contributed to the recent surge. Firstly, the International Monetary Fund (IMF) revised its forecast for global economic growth upwards, boosting market optimism. Additionally, solid second-quarter GDP growth of 2.4% in the US exceeded expectations, further supporting the positive outlook.
Furthermore, two leading oil producers in the OPEC+ cartel, Saudi Arabia and Russia, have announced plans for additional supply cuts. In July, Russia’s deputy prime minister, Alexander Novak, revealed intentions to reduce oil exports by approximately 500,000 barrels per day in the coming month. Saudi Arabia is also expected to curtail crude output after previously reducing exports by 10% or 1 million barrels per day.
The actions taken by these two nations have resulted in oil deficits, prompting Goldman Sachs economists led by Daan Struyven to note that the market has shifted away from growth pessimism. They expect prices to continue rising due to reduced recession risks and the strong pricing power of OPEC.
Overall, the strong performance of oil prices in July can be attributed to optimism regarding global demand and supply cuts by key oil producers.

Source: energyportal.eu

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