July saw a strong increase in oil prices. Where is the market headed?

In July, the price of a barrel of Brent oil rose by almost 13,5%, which is the largest monthly increase since January 2022. The price level at the end of the month was the highest since April 2023. As a result of the recent increase, the pressure for a rebound in the data on inflation for July versus June. In June, on an annual basis, crude oil became cheaper by almost 31%. On the other hand, in July prices fell by only 17% y/y.

What's next for oil prices?

Goldman Sachs, one of the world's largest investment banks, has updated its forecasts for global demand for oil. Oil demand hit a record high of 102,8 million barrels per day (bpd) in July, according to the latest figures. Despite this, the bank maintains its annual forecasts Brent crude prices at USD 93 per barrel (Brent was USD 85 at the end of July).

Analysts Goldman Sachs they predict strong demand will result in a larger-than-expected deficit of 1,8 million bpd in the second half of this year and a deficit of 0,6 million bpd in 2024. Reduced risk of recession and operation Organization of Petroleum Exporting Countries (OPEC) aimed at raising oil prices support Goldman Sachs' forecasts of higher oil prices and reduced oil volatility.

The bank predicts that oil prices will continue to rise, mainly due to voluntary production cuts by Saudi Arabia. These cuts are expected to continue into September, leading to a tightening of global supply.

Goldman Sachs updated its forecast for oil demand by about 550 bpd, while predicting that supply in 000 will increase by about 2023 bpd. Still, the bank notes that the significant increase in OPEC's reserve production capacity over the past year, the revival of growth in international offshore projects, and the decline in production costs in the US limit the potential for further price increases.

If the Brent price reached USD 93, it would be the most expensive since November 2022, which in turn could fuel fears that inflation will not return to the target of central banks around the world soon.