Oil Prices Dip After Worst Weekly Drop In 2 Years As OPEC+ Reportedly Eyes Another Big Output Boost

Oil prices declined on Monday, following the worst weekly decline in over two years, after reports suggested that OPEC+ was considering another production hike amid easing of tensions in the Middle East.

Benchmark Brent crude prices fell 0.4% at $66.56 per barrel while U.S. West Texas Intermediate crude prices were down 0.6% at $65.14 per barrel at 2.42 am GMT.

Late last week, Reuters reported, citing delegates, that OPEC+ is set to increase output by 411,000 barrels per day (bpd) in August, following similar hikes earlier this year. The production raises will lift total OPEC+ supplies by 1.78 million barrels per day (bpd) this year, to date, which will reportedly be equivalent to over 1.5% of total global demand. The group will meet on July 6 to finalize its production levels for August.

The proposed cuts will be part of its efforts to bring back 2.2 million bpd of production despite significant pressure on oil prices this year. The strategic shift by the producer group, led by Saudi Arabia, was seen as a punishment for overproducing members, such as Kazakhstan. The group is also eyeing a gain in market share from U.S. shale producers, which stepped up production when OPEC+ cut supplies.

Last week, oil prices had the worst weekly decline since March 2023, after Iran and Israel agreed to a ceasefire. The conflict had briefly pushed oil prices over $80 per barrel due to threats to the transfer of oil through the Strait of Hormuz. IG analyst Tony Sycamore stated that the oil market is now devoid of the geopolitical risk premium that was previously built into the price following the ceasefire.

Retail Sentiment about the United States Oil Fund (USO) was in ‘neutral’ territory, while retail chatter about the crude-focused ETF was ‘high’ late Sunday.

The Energy Select Sector SPDR Fund (XLE) has fallen 1.2% this year compared with 4.3% gains in the SPDR S&P 500 ETF (SPY).

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