OPEC+ Output Hike Keeps Brent Near $72

Oil prices slipped on Monday as OPEC+ confirmed a further production increase from August, and Gulf export flows continued recovering after the disruption caused by the US-Israeli war with Iran. Brent crude fell 34 cents to $71.78 a barrel by early morning GMT. US West Texas Intermediate dropped 20 cents to $68.49.

The OPEC+ group, which includes Russia, agreed on Sunday to raise output targets by 188,000 barrels per day starting in August. That follows similar increases for June and July. The move was widely expected: IG market analyst Tony Sycamore called the number "largely in line with expectation." The market reaction was muted, with both contracts little changed over the past week.

The key reason these output increases have not yet moved markets much is that they remain, in large part, targets rather than actual supply. The US-Israeli war with Iran closed the Strait of Hormuz to tanker traffic, cutting off Saudi Arabia, Kuwait, and Iraq from their export routes. Gulf members are only now reviving shipments that were halted during the conflict, so official quotas were already not being met.

Gulf exports recovering but still far below pre-war levels

The scale of the production disruption is significant. OPEC output in June rose by 3.3 million barrels per day month-on-month to reach 19.43 million bpd, according to a Reuters survey, recovering from its lowest level in more than two decades. Gulf oil exports in June jumped more than 3 million barrels from May to exceed 10 million barrels per day. Despite that recovery, volumes still remain around 40 percent below pre-war levels, meaning the market is not yet absorbing a flood of new supply.

The UAE's departure from OPEC, which took effect on May 1, adds another layer of complexity. With one of the group's larger producers now outside the cartel, OPEC+ quota targets carry less weight in reflecting actual Gulf output capacity or discipline. Sycamore noted that with the UAE gone and production still ramping up, the new quotas "probably don't mean much at the moment."

Russia is adding supply from a different direction. Oil shipments from Russia's western ports hit a record high in June and are expected to hold at that level in July. The cause is operational, not strategic: Ukrainian drone attacks have damaged Russian refineries, forcing Moscow to divert crude that would otherwise be processed domestically into export markets instead. That adds a separate stream of supply pressure, independent of OPEC+ decisions.

US-Iran relations are the main variable to watch

With the Gulf slowly reopening, traders are focused squarely on whether US-Iran diplomacy stabilises or deteriorates. Tim Waterer, chief market analyst at KCM Trade, described the mood as cautious: traders are "sitting tight and waiting to see whether US-Iran relations will be cordial or volatile this week." The Strait of Hormuz remains the critical chokepoint. Any renewed tension there could quickly reverse the export recovery and tighten global supply again.

For now, the supply picture is loosening gradually. Gulf producers are rebuilding output, Russia is exporting at record volumes, and OPEC+ has signalled more supply through the rest of the summer. But the gap between quotas and actual deliveries, the UAE's exit, and the unresolved diplomatic situation with Iran mean the oil market is trading on uncertainty more than fundamentals.

Brent has mostly declined over the past several weeks, and with demand signals unclear and supply recovery still incomplete, prices are likely to stay range-bound until the diplomatic picture around the Strait of Hormuz becomes clearer.