Brent crude rose by around 13% throughout July, increasing from $75/bbl to its peak at $85/bbl by month-end, as a result of ongoing supply constraints and a mixed economic outlook. Saudi Arabia announced it would extend its supply cut of one million bpd into August, alongside Russia pledging to lower oil exports by 500,000 bpd in August. Russian crude oil flows showed indications of declining mid-month according to vessel tracking data, causing Brent crude to climb to $80/bbl. Although weak manufacturing PMI data in China indicated a faltering economic recovery, China’s crude imports accelerated to the highest level in three years and the nation pledged to introduce stimulus measures to bolster its economy. The IEA forecast record-breaking global oil demand this year, suggesting that China is set to account for 70% of the increase, causing Brent crude to reach its highest level in over three months at $85/bbl.

GBP traded at $1.269 against USD at the beginning of July, peaking at $1.312 mid-month, the strongest level since April 2022, before declining to $1.286 by month-end. The Bank of England Governor, Andrew Bailey, stated that he expects a marked fall in inflation following aggressive monetary policy tightening. UK employment data added pressure on the Bank of England to continue interest rates hikes, with total pay growth reaching an all-time high of 6.9% and the unemployment rate rising to 4%. Although interest rates were originally forecast to peak at 6.25% by the end of the year, projections fell to 5.75% after CPI data revealed that inflation had reduced to 7.3% year-on-year growth, compared to expectations of 8.2%, easing pressure on the Bank of England. Based on current wholesale diesel prices, a two-cent rise in GBP equates to a c. 1ppl decline in the price of UK diesel.

The Saudi Arabian and Russian-led output cuts were followed by the United Arab Emirates (UAE) pledging to not implement further voluntary oil production cuts as part of the OPEC+ agreement, stating that the nation was sufficiently contributing to the supply curbs. Meanwhile, Russia’s exports of seaborne crude oil rebounded to 3.85 million bpd and Russian Urals crude oil breached the G7’s $60 price cap for the first time since the cap level was set by the group in December 2022. Despite posing issues for Western insurance and arguably signifying an economic win for Moscow, the EU stated that there will be “no movement” regarding a revision of the $60 price cap. Towards the end of the month, Russia’s seaborne crude flows declined to a six-month low, falling by 780,000 bpd from their mid-May peak, indicating the nation’s supply to international markets is finally being reduced. Finally, Rishi Sunak unveiled plans to expand North Sea oil drilling with hundreds of new oil and gas licenses to be granted in the UK, insisting the plans were consistent with the government’s 2050 net zero target.