Crude Falls as OPEC+ Output Hike Pressures Prices

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Market Overview

Oil futures retreated by more than 1% on Monday after the producer group OPEC+ approved another increase in its production targets starting in August, while exports from key Gulf suppliers via the Strait of Hormuz continued to recover, raising the prospect of additional supply in the global market.

Brent crude futures declined by $1.02, or 1.41%, to trade at $71.10 per barrel at 0756 GMT, following a 0.45% gain at the previous settlement on Friday. U.S. West Texas Intermediate (WTI) crude traded at $67.89 per barrel, down 80 cents, or 1.16%. WTI did not settle on Friday, as U.S. markets were closed ahead of the Independence Day holiday on Saturday.

Both benchmarks were broadly flat over the previous week after trending lower in recent weeks. Market participants have been closely monitoring negotiations between the United States and Iran over shipping through the Strait of Hormuz, while also tracking the rebound in crude exports from Gulf producers.

OPEC+ Production Policy and Supply Constraints

The Organization of the Petroleum Exporting Countries and its allies, including Russia, agreed on Sunday to raise their collective output targets by an additional 188,000 barrels per day from August. This follows similar target increases for June and July.

Despite these decisions, the higher targets have not fully translated into actual output. The U.S.-Israeli war on Iran has shut the Strait of Hormuz to tanker traffic for major OPEC members such as Saudi Arabia, Kuwait and Iraq, effectively limiting their production and exports.

PVM analysts commented in a note that, “They are selling into a falling market, offering little hope of an imminent price recovery.” The analysts added: “However, lower oil prices will undoubtedly stimulate demand further down the line.”

Gulf Exports and Demand Outlook

Data showed that crude exports from the Gulf region in June increased by more than 3 million barrels compared with May, surpassing 10 million barrels per day. Even so, export volumes were still 40% below levels recorded before the war.

ANZ outlined a more negative outlook for consumption, stating: “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.”

The bank added, “However, we expect demand losses to moderate in the second half of the year as supply improves and some deferred consumption returns.”

Spot Market and Regional Supply Developments

In the physical market, Abu Dhabi National Oil Company has sold around 16 million barrels of Emirati crude at wider discounts in its fifth spot tender since June, according to trade sources, highlighting a notable increase in spot supply availability.

At the same time, industry sources reported that oil exports from Russia’s western ports reached a record level in June and are expected to remain at that high level in July. Russian refineries have been damaged in drone attacks by Ukraine, prompting Moscow to increase crude shipments.

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