Oil prices dip after OPEC+ decides to increase output from August

Oil prices edged lower on Monday after the OPEC+ alliance agreed to raise its production target for August, while improving crude exports from the Gulf and record shipments from Russia reinforced expectations of higher global supplies.

Brent crude futures fell 24 cents, or 0.33%, to $71.88 a barrel in early Asian trade. US West Texas Intermediate (WTI) crude declined 11 cents, or 0.16%, to $68.58 a barrel. WTI did not settle on Friday as US markets remained closed ahead of the Independence Day holiday.

Fifth straight production increase

The latest move marks the fifth consecutive monthly increase in output targets by the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+. The group decided on Sunday to raise production by 188,000 barrels per day (bpd) from August. The increase will be shared among Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman.

The decision comes as energy markets continue to stabilise following the easing of tensions in West Asia. Commercial shipping through the Strait of Hormuz, a key route for global crude exports, has gradually resumed after disruptions caused by the recent conflict involving Iran, Israel and the United States.

Although the higher output target is expected to add more crude to the market, actual production has so far remained below planned levels because several Gulf producers were unable to fully restore exports during the conflict. With tanker movements improving, these countries have started bringing back previously disrupted supplies.

Supply recovery gathers pace

A Reuters survey showed OPEC's crude production recovered sharply in June, rising by about 3.3 million barrels per day from the previous month to 19.43 million bpd, after falling to its lowest level in more than two decades during the conflict.

Data also indicated that crude exports from Gulf producers climbed by more than 3 million barrels per day in June from May, crossing the 10 million bpd mark. However, export volumes remain around 40% below pre-conflict levels, suggesting that the recovery is still incomplete.

Meanwhile, Russia has also emerged as a significant contributor to rising global supplies. Reports say the exports from the country's western ports reached a record high in June and are expected to remain elevated in July. The increase comes as repeated Ukrainian drone attacks on Russian refineries have forced Moscow to divert more crude to export markets instead of domestic processing.

Markets remain watchful

Despite the improved supply outlook, OPEC+ said it would continue to closely monitor market conditions before deciding on further production adjustments, reiterating its commitment to maintaining stability in the global oil market.

The easing of geopolitical tensions has brought Brent crude back to levels seen before the West Asia conflict, after prices had briefly surged amid concerns over supply disruptions. However, markets remain sensitive to developments in US-Iran negotiations and security conditions around the Strait of Hormuz, through which nearly one-fifth of global oil shipments pass.