Oil prices saw a decline on Monday after OPEC+ surprised the markets by increasing output more than anticipated for August. Meanwhile, uncertainty surrounding U.S. tariffs and their potential effects on global economic growth impacted demand expectations.
Brent crude futures dropped 47 cents, or 0.69 percent, to $67.83 a barrel by 03:27 GMT (currently trading above $68). In contrast, U.S. West Texas Intermediate crude was priced at $66.05, down $0.95, or 1.42 percent (currently trading at $66.25).
The Organization of the Petroleum Exporting Countries and their allies, collectively known as OPEC+, agreed on Saturday to raise production by 548,000 barrels per day in August.
“The increased production clearly represents a more aggressive competition for market share and some tolerance for the resulting decline in price and revenue,” Reuters reported, citing Tim Evans of Evans Energy. The August increase marks a significant jump from the monthly increases of 411,000 bpd that OPEC+ had approved for May, June, and July, as well as 138,000 bpd in April.
This decision will reinstate nearly 80 percent of the 2.2 million bpd voluntary cuts from eight OPEC producers back into the market, as noted by RBC Capital analysts led by Helima Croft. However, the actual output increase has been smaller than initially planned, and most of the supply has been sourced from Saudi Arabia, they added.
Upcoming trade agreements and tariff notifications
Saudi Arabia raised the August price for its flagship Arab Light crude to a four-month high for Asia. Goldman analysts anticipate that OPEC+ will announce a final increase of 550,000 bpd for September during the next meeting on August 3.
Oil prices also faced pressure as U.S. officials indicated a delay on tariffs but did not provide specific details regarding the change. President Donald Trump stated on Sunday that the U.S. is close to finalizing several trade agreements in the coming days and will notify other countries of higher tariff rates by July 9, with those rates scheduled to take effect on August 1.
In April, Trump announced a 10 percent base tariff rate on most countries, along with higher “reciprocal” rates that could reach up to 50 percent, initially set for this Wednesday. However, Trump also mentioned that levies might range from “maybe 60 percent or 70 percent tariffs to 10 percent and 20 percent,” further complicating the situation.
