Oil prices declined by over 1% on Sunday evening following an unexpected increase in output by OPEC+ in August, which has heightened worries regarding potential oversupply in the market. Brent crude futures declined by 80 cents, representing a 1.2% decrease, settling at $67.50 per barrel. Meanwhile, U.S. West Texas Intermediate crude was priced at $65.68, reflecting a drop of $1.32, or 2%.
On Saturday, the Organization of the Petroleum Exporting Countries and their allies, collectively referred to as OPEC+, reached a consensus to increase production by 548,000 barrels per day in August. “The increased production clearly represents a more aggressive competition for market share and some tolerance for the resulting decline in price and revenue,” noted Tim Evans of Evans Energy.
The increase observed in August signifies a notable escalation from the monthly increments of 411,000 bpd that OPEC+ had sanctioned for the months of May, June, and July, as well as the 138,000 bpd recorded in April.
OPEC+ pointed to a stable global economic outlook and robust market fundamentals, such as low oil inventories, as justifications for increasing oil production. According to a note from RBC Capital analysts, led by Helima Croft, the decision will reinstate nearly 80% of the 2.2 million bpd voluntary cuts from eight OPEC producers into the market. However, the actual output increase has been smaller than anticipated thus far, with the majority of the supply originating from Saudi Arabia, they noted.
In a demonstration of assurance regarding oil demand, Saudi Arabia on Sunday elevated the August price for its flagship Arab Light crude to a four-month peak for Asia. Goldman analysts anticipate that OPEC+ will declare a definitive increase of 550,000 bpd for September during the upcoming meeting on August 3.
Further on in a separate development, U.S. President Donald Trump indicated early on Sunday that the United States is nearing the completion of multiple trade agreements in the imminent future and will inform other nations of increased tariff rates by July 9, with these elevated rates set to be implemented on August 1.