Oil prices ease as OPEC+ increases production, Hormuz traffic rebounds
Brent crude, the international benchmark, fell 0.15% to $71.87 a barrel as of 8:07 a.m. EDT after dropping as low as $71.09 earlier in the session, its lowest level since before the US-Israel-Iran war began on Feb. 28.
Oil prices edged lower Monday as OPEC+ agreed to increase crude production and shipping traffic through the Strait of Hormuz continued to recover following the US-Iran ceasefire.
What happened: Brent crude, the international benchmark, fell 0.15% in trading Monday to $71.87 a barrel as of 8:07 a.m. EDT, after dropping as low as $71.09 earlier in the session, its lowest level since before the US-Israel-Iran war began on Feb. 28.
The decline came as markets weighed signs of improving supply. With the Strait of Hormuz gradually reopening and Gulf producers restoring output, traders are increasingly focused on the prospect of a post-conflict supply glut.
Adding to the bearish sentiment, OPEC+ announced on Sunday that Saudi Arabia, Iraq, Kuwait, Oman, Algeria, Russia and Kazakhstan will raise production by 188,000 barrels per day beginning in August. The decision followed a virtual meeting to review global market conditions and marks the fifth consecutive monthly production increase as the group continues to unwind cuts first introduced in 2023.
OPEC+ comprises the Organization of the Petroleum Exporting Countries and allied producers, including Russia, Bahrain and Oman.
Why it matters: The Strait of Hormuz is one of the world's most important energy chokepoints, handling roughly one-fifth of global oil and liquefied natural gas shipments in peacetime.
After the United States and Israel launched airstrikes on Iran on Feb. 28, Tehran disrupted shipping through the waterway and targeted US assets, Israel and Gulf states, sending oil and gas prices up sharply. Brent crude climbed from around $70 a barrel before the conflict to nearly $115 in early May.
The United States and Iran signed a memorandum of understanding on June 17 to end hostilities and reopen the Strait of Hormuz, agreeing to spend 60 days negotiating a longer-term nuclear agreement.
While sporadic ceasefire violations and attacks on vessels have continued, shipping traffic has steadily recovered, although volumes remain well below the 130 to 140 ships that transited the strait each day before the conflict. Gulf producers are also ramping up output. The UAE, which left OPEC on May 1, increased crude production to more than 3.8 million bpd in June, near a record high, Reuters reported Monday.
Know more: Shipping data from LSEG showed that 10 Japan-linked vessels exited the Strait of Hormuz on Monday, while a supertanker carrying Saudi crude departed for South Korea over the weekend. Most of the Japanese-linked vessels are managed by Mitsui O.S.K. Lines.
