Oil prices eased from four-month highs as crude’s summer rally takes a breather.
Global benchmark Brent futures traded lower by 0.7% at $85.63 a barrel after reaching their highest level since April. U.S. West Texas Intermediate futures dipped 0.7% to $82.24 per barrel.
Despite those losses, WTI is up 1% for August, on pace for its third straight monthly gain. In July it rallied more than 15%.
Earlier in the session, crude rose following an attack on a key Russian oil export hub and extended production cuts by OPEC kingpin Saudi Arabia and Russia.
Over the weekend, Ukraine launched a naval drone attack on Russia’s port of Novorossiysk, a critical hub on the Black Sea for Russian oil exports. Ukraine did not immediately respond to CNBC’s request for comment.
In addition, the world’s top oil exporter Saudi Arabia last Thursday extended its voluntary crude oil output cut of a million barrels per day to the end of September. Saudi Arabia’s million barrel per day cut was implemented in July through to August, and the cut “can be extended or extended and deepened,” the state-owned Saudi Press Agency said last week.
“Now that we’ve seen supplies come off, I think I think we’ll see much higher prices,” said Josh Young, chief investment officer at Bison Interests, an oil and gas investment firm.
Russia, the world’s second largest oil exporter, also pledged Thursday to voluntarily trim oil exports by 300,000 million barrels per day in September.
“I actually think they’re going to be quite volatile,” Young said, adding that prices will be much higher over the next five years. “We might see all time-highs and prices crash as we go through this dynamic of insufficient supply relative to demand.”
Citi’s Ed Morse was slightly more optimistic about crude oil supplies after September.
Morse, global head of commodity research at the bank, says Saudi Arabia and Russian output is “likely to come back” in October, and that oil prices will hit $90 per barrel at most this quarter.
“We just don’t see demand growth being that spectacular
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