Global crude oil prices traded nearly 1 per cent lower on Monday after the alliance of oil-producing nations agreed to further increase production from August, while the recovery in crude exports through the Strait of Hormuz signalled improving global supplies.
International oil benchmark Brent crude slipped 0.76 per cent or 55 cents to $71.55 per barrel, while U.S. West Texas Intermediate (WTI) crude declined nearly 1 per cent or 68 cents to trade below $69 per barrel.
The decline in oil prices came after OPEC+ agreed to raise its production targets for August, easing concerns over global supply shortages.
Under the proposed plan, the combined production target of seven major producers — led by Saudi Arabia and Russia — will be increased by 188,000 barrels per day as the alliance continues to unwind the voluntary output cuts introduced in 2023 to support crude prices.
If implemented, the latest increase will take the cumulative production quota additions since OPEC+ began reversing its supply curbs to around 940,000 barrels per day, equivalent to nearly 1 per cent of global oil demand.
The recovery in crude exports from major producers through the Strait of Hormuz also weighed on prices, indicating that oil shipments through the key maritime route are returning to normal following recent geopolitical tensions in the region.
The easing of tensions after the interim peace agreement between the United States and Iran has enabled major Gulf producers to restore exports and output.
In addition, Saudi Arabia and the United Arab Emirates have already brought oil exports close to pre-conflict levels, increasing the availability of crude in the global market.
The return of additional supplies has also created a surplus in key Asian markets, reversing the sharp rise in oil prices witnessed during the conflict and raising the possibility of increased competition among OPEC producers for market share.
The latest production increase is expected to be the penultimate phase of restoring the output cuts announced in 2023, with one final increase likely in September to complete the rollback of the production curbs.
