Oil prices fell on Monday, with Brent crude slipping below $72 a barrel after signs of improving tanker movements through the Strait of Hormuz and OPEC+'s decision to raise production targets from August added to concerns over higher global supply.
West Texas Intermediate traded near $68 a barrel. The decline followed indications that oil and gas shipments through the U.S.-protected corridor in the Strait of Hormuz were recovering after several vessels made unexplained route changes over the weekend.
The latest move by OPEC+ also weighed on prices. The producer group agreed to lift output quotas by 188,000 barrels a day from August, extending similar increases approved for June and July. The decision signals that the alliance is preparing to restore more supply as conditions in the region improve, although much of the additional production has yet to reach the market.
Brent crude has fallen about 30% during the second quarter after Washington and Tehran reached an interim peace agreement, allowing shipping activity through the Strait of Hormuz to resume gradually. Last Thursday, both Brent and West Texas Intermediate settled at their lowest levels since before the U.S.-Israeli conflict with Iran began in late February.
OPEC+ Extends Output Increase
OPEC+ confirmed after an online meeting on Sunday that it will raise production targets by 188,000 barrels a day from August. The increase follows similar quota hikes in June and July and comes as the Strait of Hormuz gradually reopens for oil exports.
The seven producers leading the group's supply policy - Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan and Oman - have increased output targets by almost 800,000 barrels a day between April and July.
However, much of that increase has remained on paper because the U.S.-Israeli war with Iran disrupted tanker movements through the Strait of Hormuz, limiting exports from major Gulf producers including Saudi Arabia, Kuwait and Iraq.
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Production Recovery Underway
According to OPEC data, the group's production fell to 33.13 million barrels a day in May from 42.77 million barrels a day in February.
Output began recovering in June after U.S. efforts helped the UAE and other producers resume exports. Even so, production remains below levels seen before the conflict.
Oil prices have nevertheless returned to levels seen before the war. The market has come under pressure from weaker Chinese imports, increased supplies from producers outside the Middle East and a record release of strategic oil reserves coordinated by the International Energy Agency.
Iraq Seeks Higher Production Quotas
Brent crude traded near $72 a barrel on Friday, down sharply from recent highs above $120 and close to levels recorded before the U.S. and Israel launched attacks on Iran on Feb. 28.
Alongside production increases, OPEC+ is also dealing with internal changes. The United Arab Emirates has left the alliance, while Iraq has indicated that it wants higher production quotas.
OPEC+ has 21 members, including Iran, although only seven producers - together with the UAE before its exit - have managed monthly production adjustments in recent years.
Those seven countries are unwinding a 1.65 million barrels-a-day production cut agreed in 2023. Reuters calculations show they will still have about 379,000 barrels a day of that reduction left to restore after the August increase, taking into account the UAE's departure from the group on May 1.
If OPEC+ approves another increase of a similar size at its next meeting on Aug. 2, the remaining 2023 production cuts will be fully reversed.
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