Oil prices were set to post their biggest monthly gains in more than a year today, on expectations that Saudi Arabia will extend voluntary output cuts into September and tighten global supply.
Brent crude futures rose 74 cents higher to $85.73 a barrel this afternoon,.
US West Texas Intermediate crude climbed 98 cents to $81.56 a barrel, rising more than $1 earlier in the session.
The September Brent contract will expire today. The more active October contract was 89 cents higher at $85.30 a barrel.
Brent and WTI settled on Friday at their highest levels since April, gaining for a fifth week in a row, 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.
Meanwhile, Saudi Arabia is expected to extend a voluntary oil output cut of 1 million barrels per day (bpd) for another month to include September.
"There is bull-twitch in the market's antenna, something which Saudi will most definitely look to aggravate with a roll in their production cut," said PVM analyst John Evans.
"Oil will again enjoy a beginning of the month firmness that it has done for the last three cycles before global economic news comes to keep it in check," he added.
Riyadh's existing cuts have already constrained supplies, with oil inventories beginning to fall in some regions - the US in particular - as demand outpaces supply.
"Oil prices are up 18% 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.
The bank 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 US, offsetting a downgrade for China's consumption.
However, a Reuters poll of 37 economists and analysts today forecast oil prices to stall this year as high interest rates curb demand, offsetting the impact of OPEC+ production cuts on supply.
The survey predicted front month Brent oil would average $81.95 a barrel in 2023, down from June's $83.03 consensus.
