Oil Prices Dip as Middle East Tensions Ease and OPEC+ Signals Further Supply Increase

Oil prices edged lower on Monday as easing geopolitical tensions in the Middle East and expectations of an additional OPEC+ production hike in August improved supply forecasts, even as concerns over global demand continued to loom over the market.

Brent crude futures slipped 13 cents, or 0.19%, to $67.64 per barrel by 03:44 GMT, ahead of the expiry of the August contract later in the day. The more actively traded September contract was also down, losing 18 cents to trade at $66.62. U.S. West Texas Intermediate (WTI) crude declined 32 cents, or 0.49%, to $65.20 per barrel.

Despite last week marking the sharpest weekly decline for both benchmarks since March 2023, crude prices are still poised to close June with their second consecutive monthly gain, each exceeding 5%.

Much of the recent volatility has been attributed to geopolitical developments. A 12-day conflict that erupted after Israel struck Iran’s nuclear facilities on June 13 had driven Brent crude prices above $80 per barrel. However, the market quickly reversed course following a ceasefire announcement by U.S. President Donald Trump, which eliminated most of the geopolitical risk premium that had pushed prices higher.

“The market has stripped out most of the geopolitical risk premium built into the price following the Iran-Israel ceasefire,” noted Tony Sycamore, analyst at IG Markets.

Adding to the downward pressure, sources within OPEC+ — the alliance of OPEC members and allied producers — indicated plans to increase crude output by 411,000 barrels per day in August. This would mark the fifth consecutive monthly production boost since the group began easing cuts in April. The next official meeting of OPEC+ is scheduled for July 6.

Still, the market faces persistent headwinds from sluggish demand growth, particularly in China, the world’s largest crude importer. The country’s manufacturing sector contracted for a third straight month in June, weighed down by weak domestic demand and uncertain export conditions amid ongoing trade tensions with the United States.

“Uncertainty around global growth continues to cap prices,” said Priyanka Sachdeva, senior market analyst at Phillip Nova. She added that weak economic indicators from key economies have added to market caution.

In the United States, data from Baker Hughes revealed that the number of active oil rigs — a leading indicator of future production — dropped by six to 432 last week, the lowest level recorded since October 2021. While this suggests potential softness in U.S. supply growth, it has so far failed to counterbalance broader bearish market sentiment.

Analysts suggest that unless a new geopolitical shock or supply disruption emerges, oil prices may remain under pressure as supply grows and demand struggles to keep pace.