Oil tumbles as Opec+ output hike raises glut concerns
Opec+ agreed to a bigger-than-expected production increase in August just as US tariffs fan fears about the demand outlook.
Singapore – Oil prices extended declines after Opec+ agreed to a bigger-than-expected production increase in August, raising concerns about oversupply just as US tariffs fan fears about the demand outlook.
Brent crude futures fell 1.2 per cent to US$67.50 a barrel by 0010 GMT, while US West Texas Intermediate crude tumbled 2 per cent to US$65.68.
The Organization of the Petroleum Exporting Countries and their allies, a group known as Opec+, decided on July 5 to increase supply by 548,000 barrels a day, putting the oil cartel on track to unwind its most recent output cuts a year earlier than planned.
Alliance officials cited summer demand as one reason for their optimism that the extra barrels could be absorbed by the market, with the move answering US President Donald Trump's calls for lower fuel costs.
The oil market has been volatile in
recent weeks following the conflict between Israel and Iran, with a fragile truce now in place and focus shifting to Opec+ supply and US trade policy. Mr Trump's country-by-country tariffs will take effect Aug 1, Commerce Secretary Howard Lutnick said, signalling some breathing room for trading partners ahead of a previous deadline of July 9.
Opec+ previously announced hikes of 411,000 barrels a day for May, June and July – already three times faster than scheduled – and traders had expected the same amount for August. The increase amplifies a dramatic strategy pivot, from years of output restraint to reopening the taps to reclaim market share.
The group is 'clearly taking advantage of a period of tightness in global energy markets,' said Robert Rennie, the head of commodity and carbon research at Westpac Banking Corp. However, there are 'downside risks' to oil prices as seasonal demand wanes after summer, he added.
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The boost was based on 'a steady global economic outlook and current healthy market fundamentals,' the group said in a statement on July 5. Saudi Arabia followed with a price increase to its main crude grade for Asia next month, signalling confidence the market can withstand the extra Opec+ supplies.
The alliance will consider adding another 548,000 barrels a day in September at its next meeting on Aug 3, according to delegates, which would complete the revival of 2.2 million barrels a day of cuts made in 2023. BLOOMBERG
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