Crude oil prices reached a three-month high, still holding well above 6700 level

Crude oil prices reached a three-month high on July 31, 2023, still holding well above 6700 level, driven by tightening global supply and increasing demand, supported by OPEC+ output cuts and economic developments in major crude oil-consuming countries. The International Energy Agency (IEA) projected that demand would reach a record high of 102.1 million barrels per day (bpd) this year, although slightly below its initial estimate due to economic headwinds and potential interest rate hikes. Despite a slight downgrade in growth forecasts, the demand remains robust. Major Asian consumers, India and China, have been importing record volumes of Russian crude oil, indicating their continued appetite for oil. Oil inventories are dwindling globally, particularly in the US, where the Strategic Petroleum Reserve is being refilled from historically low levels. Meanwhile, Goldman Sachs (NYSE:) has revised its demand outlook, estimating global oil demand rose to a record 102.8 million bpd in July. The bank has raised its 2023 demand forecast by 550,000 bpd due to stronger economic growth estimates in India and the US, offsetting a slight downgrade for China’s consumption.

The voluntary output cuts by Saudi Arabia and Russia, which are expected to continue into September, effectively reduce the global oil supply. Given the positive economic indicators from the United States, the world’s largest consumer of crude oil, and the ongoing supply cutbacks by OPEC+ nations, crude oil prices are likely to remain firm in August. , currently holding well above $82 per barrel, has the potential to test $88.50, while WTI crude could test $85. In the Indian context, MCX crude oil prices trading above the 6500 level mark provide a strong signal for a bullish trend which can support the prices to test 7000/7100 level zone soon. Investors should closely monitor these factors as crude oil prices continue to show potential for further gains in the coming month.