Brent is trading around $72 per barrel — levels seen at the end of February, before the war with Iran began. OPEC+ has approved another production increase starting in August. Analysts warn: the cartel is selling into a falling market.
Strait of Hormuz Opens, Oil Does Not Rise
The resumption of shipments through the Strait of Hormuz has removed the geopolitical premium from oil. According to UBS analyst Giovanni Staunovo, pressure on prices persists precisely because tankers previously blocked in the Persian Gulf are gradually leaving — the oil overhang on the water is growing.
Brent lost 0.06% to $72.08 per barrel, WTI is trading at $68.62. Both contracts have rolled back in recent weeks to prewar levels, virtually erasing the entire war premium from the price.
UAE Leaves OPEC and Immediately Increases Production
The United Arab Emirates ramped up production to nearly a record 3.8 million barrels per day in June — after leaving OPEC, which allowed the country to avoid production quotas. This is an additional source of supply in a market already digesting the gradual lifting of restrictions through the strait.
Saudi Arabia cut the official selling price for Arab Light for Asia in August by $1.50 per barrel below the Oman/Dubai benchmark. According to Reuters, this is the largest monthly price cut since 2003. Riyadh is essentially buying market share at the expense of margin.
OPEC+ Adds 188,000 Barrels Per Day
On Sunday, OPEC+ agreed to another increase in production targets by 188,000 barrels per day starting in August — in addition to similar decisions for June and July. In total, this creates a significant potential increase in supply.
In practice, the effect is still limited. The war with Iran closed the Strait of Hormuz to tanker traffic from Saudi Arabia, Kuwait, and Iraq — key alliance members. The quota increases remained mostly on paper, as physical shipments were blocked.
As shipping normalizes, paper quotas will begin to turn into real barrels on the market. PVM analyst Tamas Varga assesses the situation harshly: “They are selling into a falling market, offering almost no hope for a quick recovery in prices. However, low prices will stimulate demand in the long run.”
Strike on Russian Oil Infrastructure
An additional factor this week was a Ukrainian military strike on Russia’s largest oil refinery in Omsk, as well as on facilities in the Yaroslavl and Leningrad regions. The scale of the damage and the impact on Russian oil exports have yet to be assessed.
Russian oil is trading at a significant discount and is going mainly to Asia, bypassing Western sanctions. Disruptions in refining could theoretically reduce exports of oil products, but the direct effect on Brent and WTI will depend on the scale and duration of the damage.
Talks on Hormuz Remain in Focus
The US and Iran continue talks on shipping through the Strait of Hormuz. The market is watching closely: the strait remains a critical point for about 20% of global oil transit. Any disruptions could instantly return a geopolitical premium to the price.
The current equilibrium is fragile. Brent at $72 reflects a market where the sanctions and war shock has been absorbed, but the structural balance of supply and demand has not yet stabilized. If the current OPEC+ trajectory continues — and the release of blocked tankers accelerates — pressure on prices may persist in the coming weeks.
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