Oil on track for biggest monthly gains in over a year

Oil prices hovered near three-month highs on Monday, set to post their biggest monthly gains in over a year on expectations that Saudi Arabia would extend voluntary output cuts into September and tighten global supply.

Brent crude futures dipped 9 cents to $84.90 a barrel by 0005 GMT while U.S. West Texas Intermediate crude was at $80.41 a barrel, down 17 cents.

The September Brent contract will expire later on Monday. The more active October contract was at $84.23 a barrel, down 18 cents.

Brent and WTI settled on Friday at their highest levels since April, gaining for a fifth straight week, as tightening oil supplies globally and expectations of an end to U.S. interest rate hikes supported prices. Both are on track to close July with their biggest monthly gains since January 2022.

Saudi Arabia is expected to extend a voluntary oil output cut of 1 million barrels per day (bpd) for another month to include September, analysts said.

"Oil prices are up 18 per cent since mid-June as record high demand and Saudi supply cuts have brought back deficits, and as the market has abandoned its growth pessimism," Goldman Sachs analysts said in a July 30 note.

"We still expect the extra 1 million bpd Saudi cut to last through September, and to be halved from October."

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

Goldman Sachs estimated that global oil demand rose to a record 102.8 million bpd in July and it revised up 2023 demand by about 550,000 bpd on stronger economic growth estimates in India and the United States, offsetting a downgrade for China's consumption.

"Firmer demand is driving a moderately larger deficit in H2 2023 than expected, averaging 1.8 million bpd, and a modest 0.6 million bpd deficit in 2024," it said.

Exxon Mobil's (XOM.N) CEO Darren Woods said the company expects record oil demand this year and next year, and that this may help boost energy prices in the second half of the year.

In the U.S., energy firms in July cut the number of oil rigs for an eighth straight month by one to 529, Baker Hughes said in its weekly report on Friday.