The oil market depreciated on Monday as investors weighed easing Middle East risks and a possible output increase by the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) in August.
During the session, the price of Brent crude oil grade declined by 16 cents or 0.2 per cent to $67.61 a barrel and the US West Texas Intermediate (WTI) crude oil grade slipped by 41 cents or 0.6 per cent to $65.11 a barrel.
Prices had rise above $80 a barrel in the month before sliding back to $67 after the market overlooked the 12-day war that started with Israel targeting Iran’s nuclear facilities on June 13.
A ceasefire brokered by President Donald Trump of the US appears to be holding up, so the supply risk premium that was in place is continuing to be withdrawn, market analysts noted.
Since there will be no apparent closure of the Strait of Hormuz, the world’s most critical crude flow lane where more than 20 million barrels of crude pass every day, equal to a fifth of global daily oil consumption, this has eased prices.
The OPEC+ group is also set to boost production by 411,000 barrels per day in August after similar increases for May, June and July.
The oil producer group is set to meet again on July 6 to discuss net month’s production plans. Reuters quoted unnamed sources as saying the group may even boost the size of output additions for August.
If the increase is agreed, it would bring the total rise in supply from OPEC+ to 1.78 million barrels per day so far this year, equivalent to over 1.5 per cent of total global demand.
Meanwhile, OPEC oil output rose in May, but gains were limited by cuts by countries that had previously exceeded their quotas. Top producers like Saudi Arabia and the United Arab Emirates (UAE), meanwhile, made smaller increases than allowed.
Kazakhstan, which has persistently exceeded quotas set by OPEC+, may exceed its previous oil production forecast by around 2 per cent this year following an upgrade to output at its largest Caspian oilfields. This move may anger big contributors like Saudi Arabia.
Factory data from China also contributed to the bearish sentiment. According to the latest PMI figures from China’s statistics bureau, manufacturing activity in China rose slightly to 49.7 this month from 49.5 in May but remained below the 50 threshold that marks the difference between growth and contraction. This was the third consecutive month with sub-50 PMI readings.