Oil is heading for its biggest monthly gain in more than a year

Oil prices hovered near a three-month high on Monday and were on track for their biggest monthly gain in more than a year amid expectations that Saudi Arabia will extend voluntary output cuts into September and global supplies tighten.

By 0005 GMT, Brent crude futures fell 9 cents to $84.90 a barrel. US West Texas Intermediate crude also fell 17 cents to $80.41 a barrel.

The September Brent crude contract expires later on Monday. The October contract was the most active, recording $84.23 a barrel, down 18 cents.

Brent and West Texas Intermediate settled on Friday at their highest levels since April, extending gains for the fifth consecutive week, after prices were supported by tight global oil supplies and expectations of an end to US interest rate hikes. Both benchmarks are on their way to ending July with their biggest monthly gains since January 2022.

Analysts said that Saudi Arabia is expected to extend the voluntary reduction of its oil production by one million barrels per day for another month, to include September.

“Oil prices have risen 18 percent since mid-June as a record surge in demand and a reduction in Saudi supply has returned the market deficit as the market abandons growth pessimism,” Goldman Sachs analysts said in a note on July 30.

“We still expect the additional Saudi cut of 1 million barrels per day to continue until September and to halve from October,” the analysts added.

The bank maintained its forecast for Brent crude at $86 a barrel for December and expects prices to rise to $93 in the second quarter of 2024.