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1. Oil Price Movements
Oil prices saw slight gains on Tuesday as market participants evaluated expectations of an OPEC+ output hike announcement for August, along with ongoing trade negotiations.
At 1133 GMT, Brent crude was up by 54 cents, or 0.8%, trading at $67.28 per barrel, while U.S. West Texas Intermediate crude rose by 56 cents, or 0.9%, to $65.67 per barrel.
The market’s main attention is focused on the upcoming OPEC+ meeting scheduled for July 6, where the alliance is expected to announce an output hike of 411,000 barrels per day (bpd) for August, building on similar hikes in the preceding months of May, June, and July.
2. OPEC+ Output Increase: Impact and Concerns
OPEC+ has consistently ramped up production this year, and the potential for another substantial increase in August is contributing to market caution. The 411,000 bpd hike would bring OPEC+’s total supply increase for the year to 1.78 million bpd, or more than 1.5% of global oil demand.
According to Saxo Bank analyst Ole Hansen, the market’s focus is on the acceleration of output increases, and this is driving some concerns about oversupply.
ANZ senior commodity strategist Daniel Hynes further highlighted these concerns, noting that the OPEC+ alliance’s production hikes could potentially continue at an accelerated pace, which would exert downward pressure on oil prices, especially when combined with the market’s supply-demand balance.
3. Geopolitical and Trade Developments
Alongside the output hike, investors are closely monitoring trade negotiations ahead of the July 9 tariff deadline set by U.S. President Donald Trump.
U.S. Treasury Secretary Scott Bessent raised concerns that despite good-faith negotiations, countries could still face sharply higher tariffs, as Trump’s suspended tariff rates are set to revert from a temporary 10% level to 11%-50% starting July 9. This has led to heightened uncertainty about the direction of U.S. trade policy, with significant implications for oil demand.
Meanwhile, the European Union (EU) is seeking immediate relief from tariffs in key sectors as part of any trade deal with the U.S. by the approaching July 9 deadline. According to EU diplomats speaking to Reuters, these trade talks will be crucial in determining the future of the tariff regime and could impact the broader market sentiment.
4. Ongoing Impact of Israel-Iran Conflict
The Israel-Iran conflict has also played a pivotal role in recent oil price fluctuations. A 12-day war that began with Israel targeting Iran’s nuclear facilities on June 13 led to an initial surge in Brent crude prices, pushing them above $80 per barrel.
However, this rally was short-lived, as President Trump brokered a ceasefire between Israel and Iran, which resulted in prices falling back to $67 per barrel. The de-escalation of geopolitical tensions has led to some relief in the oil markets, with concerns about supply disruptions from the region diminishing.
5. Future Outlook: Oversupply Risks
Looking forward, analysts such as Morgan Stanley anticipate that Brent crude could retrace to around $60 per barrel by early next year. This outlook is primarily driven by a well-supplied market and abating geopolitical risks, particularly following the Israel-Iran ceasefire.
Furthermore, Morgan Stanley forecasts an oversupply of 1.3 million bpd by 2026, which could put additional downward pressure on prices over the medium term, particularly if OPEC+ continues its current production pace while global demand growth slows.
6. Conclusion: Key Market Dynamics
Oil prices have been significantly influenced by a mix of geopolitical tensions, trade uncertainties, and OPEC+ production policies. While a ceasefire between Israel and Iran has helped quell concerns over Middle Eastern oil supply disruptions, the upcoming OPEC+ meeting and the looming U.S. tariff deadline are set to keep investors on edge.
The market is awaiting further clarity on how these factors will impact supply and demand dynamics in the coming months. The delicate balance between OPEC+ production decisions, U.S. trade policy, and geopolitical stability will likely determine the trajectory of oil prices in the near term.
