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Crude oil prices faced downward pressure, with August WTI crude oil (CLQ25) declining 0.29% to $65.85 per barrel and Brent crude (UKOIL) dropping 0.29% to $68.97 per barrel. Concerns over a global oil supply glut, driven by potential increases in Iraqi and Saudi exports, outweighed support from EU sanctions on Russian crude and a weaker U.S. Dollar Index (DXY) at 97.806, down 0.67%. Policymakers must address supply dynamics and trade policies to stabilize energy markets and mitigate economic risks.
Iraqi Export Resumption Fuels Oversupply Worries
Iraq’s approval to resume crude exports from its Kurdish region via the Iraq-Turkey pipeline, halted since March 2023, threatens to boost global supply by 230,000 barrels per day (bpd). As OPEC’s second-largest producer, Iraq’s move could prompt Saudi Arabia to increase exports to maintain market share, further exacerbating oversupply. The International Monetary Fund projects a 0.3% global GDP reduction in 2025 from supply-driven price declines, impacting oil-dependent economies. This development pressures WTI and Brent prices, with August RBOB gasoline (RBQ25) falling 0.99% to a two-week low.
EU Sanctions on Russia Offer Limited Support
EU sanctions imposed on July 18, targeting Russian crude exports and refined products processed in third countries like India’s Nayara Energy, aim to curb Russia’s energy trade. The package, including restrictions on 20 Russian banks and 105 shadow fleet ships, seeks to tighten supply. However, market confidence in Russia’s ability to redirect exports via non-sanctioned routes limits price support. The People’s Bank of China’s $5 billion Yuan defense, steadying CNY/USD at 0.1410, reflects global caution, indirectly supporting oil priced in USD as the DXY weakens.
OPEC+ Output Hikes Intensify Pressure
OPEC+’s July 5 decision to raise crude production by 548,000 bpd starting August 1, exceeding expectations of a 411,000 bpd increase, signals a reversal of two-year cuts. Saudi Arabia’s hint at further hikes, potentially totaling 2.2 million bpd by September 2026, aims to discipline overproducing members like Iraq and Kazakhstan. June’s OPEC+ output rose 360,000 bpd to 28.10 million bpd, a 1.5-year high, pushing Brent toward support at $68.46. U.S. tariffs, set for August 1, could further dampen oil demand, with Commerce Secretary Howard Lutnick signaling potential trade deal flexibility.
Asset Market Reactions
The DXY’s 0.67% drop to 97.806 bolstered EUR/USD to 1.1700, up 0.4%, and GBP/USD to 1.3600, up 0.3%, while 10-year Treasury yields fell to 4.64%, reflecting safe-haven flows. A 50% U.S. copper tariff lifted futures 17%, supporting commodity-linked assets, but oil’s bearish momentum, with WTI’s RSI nearing oversold, suggests support at $65.00 and resistance at $67.50. Brent’s daily range of $68.46–$69.58 indicates consolidation, with a potential drop to $67.00 if oversupply fears persist. Diesel crack spreads, up 4% to $26.58 per barrel, signal tighter distillate markets, curbing oil’s losses.
Stabilizing Energy Markets
Crude’s decline to $65.85 for WTI and $68.97 for Brent reflects oversupply risks from Iraq and OPEC+, tempered by EU sanctions and a weaker DXY. U.S. policymakers must clarify tariff timelines, while OPEC+ leaders, including Saudi Arabia, should balance output to prevent a price collapse. Investors should monitor U.S. inventory data and Iran’s nuclear talks on July 25, which could impact supply dynamics. Without coordinated action, WTI risks falling to $65.00 and Brent to $67.00 by late July, threatening energy sector stability. Clear trade and production policies are essential to sustain 2025’s fragile economic recovery.
