Higher Supply Expectations Pressure Crude Markets
Oil prices fell by more than 1% on Monday after OPEC+ agreed to increase production targets again from August, while exports through the Strait of Hormuz continued to recover, reinforcing expectations of improving global crude supplies.
Brent crude futures dropped $1.02, or 1.41%, to $71.10 per barrel by 07:56 GMT, following a 0.45% gain on Friday. U.S. West Texas Intermediate (WTI) crude declined 80 cents, or 1.16%, to $67.89 per barrel. There was no official WTI settlement on Friday because U.S. markets were closed for the Independence Day holiday.
OPEC+ Extends Production Increases
Crude prices were broadly unchanged last week after several weeks of declines, as traders monitored negotiations between the United States and Iran and assessed the impact on shipping through the Strait of Hormuz, alongside the gradual recovery in Gulf exports.
On Sunday, the Organization of the Petroleum Exporting Countries and its allies, including Russia, agreed to raise collective production targets by a further 188,000 barrels per day from August, following similar increases introduced in June and July.
Although the additional output has so far remained largely theoretical because the U.S.-Israeli conflict with Iran temporarily disrupted tanker movements through the Strait of Hormuz, improving export flows are now increasing expectations of additional supply reaching international markets.
Analysts See Limited Near-Term Support for Prices
PVM analysts said producers are increasing supply despite weakening market conditions.
“They are selling into a falling market, offering little hope of an imminent price recovery,” the analysts said.
They added that “However, lower oil prices will undoubtedly stimulate demand further down the line.”
Trade data showed Gulf oil exports increased by more than three million barrels per day in June compared with May, exceeding 10 million barrels daily. Even so, export volumes remain about 40% below levels recorded before the conflict.
Demand Outlook Weakens Despite Expected Recovery
ANZ revised its demand outlook lower, forecasting global oil consumption to decline by 1.5 million barrels per day in 2026 following a sharper-than-expected slowdown during the second quarter.
The bank said “We now expect global oil demand to contract by 1.5 million barrels per day in 2026, reflecting a sharper-than-expected downturn in Q2, when year-on-year declines could reach 4 million bpd based on preliminary data.”
It added, “However, we expect demand losses to moderate in the second half of the year as supply improves and some deferred consumption returns.”
Meanwhile, Abu Dhabi National Oil Company sold around 16 million barrels of crude through its latest spot tender at wider discounts, highlighting growing availability in the spot market.
Separately, exports from Russia’s western ports reached a record level in June and are expected to remain elevated during July as refinery disruptions caused by Ukrainian drone attacks continue to redirect more crude into export markets.