Oil edges lower after Opec+ raises August output targets

WASHINGTON: Oil prices moved slightly lower on Monday after Opec+ agreed to lift its output targets again from August, while crude exports through the Strait of Hormuz continued to recover, adding to expectations of increased global supply.

Brent crude futures were down 34 cents, or 0.47pc, at $71.78 a barrel by 0408 GMT, after finishing 0.45pc higher on Friday. US West Texas Intermediate crude fell 20 cents, or 0.29pc, to $68.49 a barrel. There was no WTI settlement on Friday because US markets were closed ahead of the Independence Day holiday on Saturday.

Both benchmarks were little changed last week after generally declining in recent weeks, as investors tracked developments in talks between the United States and Iran over shipping through the Strait of Hormuz and monitored the rebound in Gulf oil exports.

Tim Waterer, chief market analyst at KCM Trade, said traders were waiting to see how relations between Washington and Tehran would develop this week.

"Coming off the US long weekend, traders are sitting tight and waiting to see whether US-Iran relations will be cordial or volatile this week,"

The Organisation of the Petroleum Exporting Countries and its allies, including Russia, agreed on Sunday to raise output targets by a further 188,000 barrels per day from August, following similar increases for June and July.

However, the reported increase has largely remained on paper because the US-Israeli war with Iran disrupted tanker traffic through the Strait of Hormuz for major Opec producers including Saudi Arabia, Kuwait and Iraq, limiting their ability to increase output.

Tony Sycamore, a market analyst at IG, said the latest quota increase was broadly in line with expectations.

"The number was largely in line with expectation,"

He also said quota levels may have limited immediate significance because production is still recovering after the conflict and targets are not yet being fully met.

“With the United Arab Emirates (UAE) leaving and when quotas are probably still not being met due to production still ramping up after the conflict — I’m not sure they mean much at the moment.”

The UAE quit Opec as of May 1.

Exports and output recover

Gulf producers have started restoring supplies that were shut during the Iran war and have been increasing exports. A Reuters survey found that Opec oil output in June rose by 3.3 million barrels per day from the previous month to 19.43 million bpd, rebounding from its lowest level in more than two decades.

Data also showed Gulf oil exports in June climbed by more than 3 million barrels from May to above 10 million barrels per day, although that volume was still 40pc below levels seen before the war.

Separately, oil shipments from Russia’s western ports reached a record high in June and are expected to stay at that level in July. The increase followed damage to Russian refineries in Ukrainian drone attacks, which has forced Moscow to send more crude to export markets.