Brent crude fell below $72 a barrel on Monday after signs of improving tanker movements through the Strait of Hormuz and OPEC+'s decision to raise production targets for August fuelled expectations of higher global supply. West Texas Intermediate traded near $68 a barrel as oil and gas shipments through the U.S.-protected corridor in the Strait of Hormuz showed signs of recovering after disruptions caused by the recent conflict.
OPEC+ Epands Supply
OPEC+ approved an increase of 188,000 barrels per day from August, extending similar production hikes announced for June and July. The move signals the group's intention to gradually restore supply as conditions in the region improve, although much of the additional output has yet to reach the market.
The seven producers leading the output policy—Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan and Oman—have increased production targets by nearly 800,000 barrels per day between April and July. However, much of that increase remained on paper after the U.S.-Israel conflict with Iran disrupted tanker movements through the Strait of Hormuz, limiting exports from key Gulf producers.
According to OPEC data, the group's production fell to 33.13 million barrels per day in May from 42.77 million barrels per day in February. Output began recovering in June after exports resumed, but production remains below pre-conflict levels.
Brent crude has declined about 30 per cent during the second quarter after Washington and Tehran reached an interim peace agreement that allowed shipping activity through the Strait of Hormuz to gradually resume. Prices have now returned to levels seen before the conflict, weighed down by weaker Chinese imports, higher supplies from producers outside the Middle East and record strategic oil reserve releases coordinated by the International Energy Agency.
Alongside the production increases, OPEC+ is also managing internal changes. The United Arab Emirates has exited the alliance, while Iraq has sought higher production quotas. The seven countries are unwinding a voluntary production cut of 1.65 million barrels per day agreed in 2023. After the August increase, around 379,000 barrels per day of those cuts will remain. If OPEC+ approves another increase of a similar size at its August 2 meeting, the remaining voluntary cuts will be fully reversed. |
