Investing.com -- Oil prices traded sideways on Monday, sticking to their highest levels in nearly four months after major producers Saudi Arabia and Russia extended recent supply cuts, with focus now turning to key inflation readings this week.
Crude markets logged a sixth straight week of gains after the Saudi and Russian cuts last week, buoyed by hopes that tightening supplies will offset a potential slowdown in demand this year.
Expectations of more stimulus measures in major oil importer China also aided sentiment, although economic data continued to paint a bleak picture for the Asian giant.
Brent oil futures steadied around $86.22 a barrel, while West Texas Intermediate crude futures were flat at $82.78 a barrel by 22:15 ET (02:15 GMT). Both contracts were at their highest levels since mid-April.
Oil aided by supply cuts, OPEC+ meeting offers no surprises
Extended supply reductions by Saudi Arabia and Russia were the biggest source of support for oil markets over the past week, after both countries said they will maintain recent supply cuts until at least end-September.
Saudi Arabia will keep trimming production by 1 million barrels per day (bpd), while Russia will cut oil exports by 300,000 bpd. Both moves were aimed at buoying oil prices, and appear to have had their intended effect so far, with prices up 14% in July.
The production cuts were announced ahead of a meeting of the Organization of Petroleum Exporting Countries and allies on Friday, where the cartel kept its output policy unchanged, as unexpected.
Still, the prospect of tighter supplies is expected to support oil prices through the second half of the year. A slew of investment banks recently upgraded their oil price forecasts for 2023, citing tighter supplies.
High oil prices are also expected to offset a potential decline in demand, as the global economy cools from high interest rates and as a Chinese economic recovery slows.
U.S., Chinese inflation readings on tap
Markets are now focused squarely on inflation readings from the U.S. and China, due later this week. U.S. consumer price index inflation is expected to have increased slightly in July, remaining above the Federal Reserve’s target range and potentially attracting more hawkish measures from the central bank.
On the other hand, Chinese inflation is expected to have declined further in July, heralding more near-term weakness in the world’s largest oil importer, as a post-COVID economic recovery runs dry.
Chinese trade data, due on Tuesday, is also expected to provide more insight into crude demand in the country. China’s oil imports have remained close to record highs this year.