Oil prices witnessed a decline on Monday, driven by a reduction in geopolitical risks in the Middle East and the anticipation of another OPEC+ output increase in August, which bolstered supply expectations amid ongoing uncertainties regarding global demand.
Brent crude futures dropped by 13 cents, or 0.19 percent, settling at $67.64 a barrel by 03:44 GMT (currently trading above $66.60), just ahead of the August contract’s expiration later on Monday. The more actively traded September contract stood at $66.62, down 18 cents.
In the United States, West Texas Intermediate crude fell by 32 cents, or 0.49 percent, to $65.20 a barrel (currently trading above $65.15). Last week, both benchmarks marked their largest weekly decline since March 2023; however, they are poised to conclude June with a second consecutive monthly gain exceeding 5 percent.
A 12-day conflict that began with Israel targeting Iran’s nuclear facilities on June 13 led to a spike in Brent prices, which soared above $80 a barrel after the U.S. bombed Iran’s nuclear sites, only to retreat to $67 following President Donald Trump’s announcement of a ceasefire between Iran and Israel.
OPEC+ production increase planned
The market has largely eliminated the geopolitical risk premium that was factored into prices after the ceasefire announcement, Reuters reported, citing IG Markets analyst Tony Sycamore.
Further influencing the market, four delegates from OPEC+, which encompasses allies of the Organization of the Petroleum Exporting Countries, indicated that the group is poised to increase production by 411,000 barrels per day in August, following similar output hikes for May, June, and July. OPEC+ is scheduled to convene on July 6, marking the fifth consecutive monthly increase since the group began unwinding production cuts in April.
Nonetheless, bearish sentiment stemming from worries about slowing global oil demand, particularly from China, is expected to endure. “Uncertainty surrounding global growth continues to cap prices,” remarked Priyanka Sachdeva, senior market analyst at Phillip Nova.
China’s factory activity contracted for the third consecutive month in June, as weak domestic demand and declining exports burdened manufacturers amid trade uncertainties with the U.S.
In the U.S., the count of active oil rigs, a key indicator of future production, decreased by six to 432 last week, marking the lowest level since October 2021, as reported by Baker Hughes.
Read more: Oil prices rise 0.33 percent to $67.9 as dip in U.S. crude stocks signals strong demand
Ceasefire impact on crude prices
On Friday, oil prices saw a slight uptick, recovering from a midday dip into negative territory following a report indicating that OPEC+ plans to increase production in August. However, prices tumbled approximately 12 percent over the week, marking their steepest drop since March 2023. Brent crude futures settled at $67.77 a barrel, gaining 4 cents, or 0.1 percent. Meanwhile, U.S. West Texas Intermediate crude finished up 28 cents, or 0.4 percent, at $65.52 a barrel.
The ongoing decline in crude prices was already anticipated following the ceasefire between Israel and Iran. During the 12-day conflict that began when Israel targeted Iran’s nuclear facilities on June 13, Brent prices briefly surged above $80 a barrel, only to fall back to $67 after President Trump announced the ceasefire.
Prices were also bolstered earlier in Friday’s session by multiple oil inventory reports indicating significant draws in middle distillates, according to Tamas Varga, an analyst at PVM Oil Associates.
U.S. government data released on Wednesday revealed that crude oil and fuel inventories declined last week, accompanied by an uptick in refining activity and demand. Additionally, Thursday’s data indicated that independently held gasoil stocks at the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub fell to their lowest levels in over a year, while Singapore’s middle distillate inventories also declined as net exports increased week over week.
Moreover, analysts noted a surge in China’s Iranian oil imports in June, as shipments accelerated prior to the Israel-Iran conflict, with demand from independent refineries on the rise.
