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- Benchmark oil prices are up 16% in July, putting the commodity on pace for its best month since January 2022.
- Optimism around global growth has helped fuel the rally.
- Supply cuts by OPEC+ leaders Saudi Arabia and Russia have also squeezed crude prices higher.
Oil is on course to post its best month since war broke out in Ukraine, thanks to a stronger narrative surrounding global demand and supply cuts by key producers Saudi Arabia and Russia.
West Texas Intermediate crude prices have jumped 16% to over $81 a barrel in July, while the Brent crude benchmark has risen 13% to just under $85 a barrel over the same period.
That puts the commodity on course for its biggest month of gains since January 2022.
The bounceback month means the two benchmarks have each fallen under 1% year-to-date, reflecting the fact that worries about a global recession have died down in July.
Last week alone, the IMF upped its forecast for the world economy and the US logged second-quarter GDP growth of 2.4%, smashing forecasters' expectations.
Two of the OPEC+ cartel's leading oil producers have also signaled further supply cuts recently, squeezing crude prices higher.
Earlier in July, Russia's deputy prime minister Alexander Novak said Moscow planned to cut its oil exports by around 500,000 barrels a day next month.
Saudi Arabia is also expected to further slash its crude output, having shocked commodity markets earlier this year by slashing its exports by around 10% – or 1 million barrels a day.
"Saudi supply cuts have brought back deficits, and… the market has abandoned its growth pessimism," a team of Goldman Sachs economists led by Daan Struyven said in a note to clients Sunday.
Prices will likely carry on rising from here due to "reduced recession risk and strong OPEC pricing power," they added.