While the US and Iran could not agree on the revival of the nuclear deal and the increase in Iranian oil exports was delayed, investors focused on the outcome of the OPEC+ meeting. Oil prices hit October 2018 highs on Monday and then retreated.
Brent crude for August fell 16 cents, or 0.2%, to $76.02 as of 0318 GMT, while West Texas Intermediate crude fell 12 cents, or 0.2%, to $73.93 for August.
Oil prices have soared last week as fuel demand recovers with strong economic growth and increased travel across the northern hemisphere in summer. While the Organization of the Petroleum Exporting Countries (OPEC) and its allies continue to cut production, they are making plans to increase a little without disturbing the market balances at the meeting on July 1st.
The producer group, known as OPEC+, returned 2.1 million bpd to the market from May to July as part of a plan to gradually ease last year’s record oil production cuts.
OPEC needs to respond to the recovery in demand. As oil prices rise on demand recovery, OPEC+, which plans to increase production in August, could further ease supply cuts.
There is room to ease supply constraints given high prices and we could see an increase of 250,000-500,000 bpd from August onwards. It means that if it increases by 500,000 barrels, it will support higher prices. A rise less than this amount means that the bulls are pushing the market higher in the near term.
Negotiations on reviving the Iran nuclear deal are expected to resume in the coming days. A monitoring agreement between Tehran and the UN nuclear watchdog expired last week.
The weakening of the US dollar and the reversal of risk appetite in global markets also supported commodity prices in dollar terms.
The United States added 13 oil and gas rigs in June, up for an 11th month in a row along with higher oil prices, although it was the smallest monthly increase since September 2020, Baker Hughes data showed on Friday.
