Brent crude averaged $75/bbl in June. The decision of Saudi Arabia to extend its 1 mb/d production cut into August, along with Russia’s 500,000 b/d export reduction in August, pushed Brent above $76/bbl at the beginning of July. Additionally, consecutive weeks of US crude inventory draw and strong US job data provided further support to prices. Brent is now trading at $77.69/bbl and forecasted to move higher in 2H23.
The combination of higher-than-expected supply from OPEC+, ongoing US inventory draws, and positive US demand data has maintained Brent within the range of $71/bbl to $80/bbl since May. Looking ahead, anticipated production cuts by OPEC+ will help tighten supply and support prices.
Recent data from the US show stronger oil demand in May and June, China’s May demand has shown y-o-y increases, but lower m-o-m. Weak PMI data from the US, EU, and China indicate ongoing economic fragility. Further interest rate increases by Western central banks could weigh on the economy and impact future demand.
OPEC’s attempts to reduce production by over 1 million b/d in May were thwarted by notable increases in production from exempt members like Iran, Nigeria, and Angola.
Doubts remain regarding Russia’s willingness to fulfil its committed pledge of a 500,000 b/d production cut, as high levels of exports continue. In June, India’s crude imports from Russia saw a monthly increase of 250,000 b/d.
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