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Oil prices slipped on Monday, pressured by easing tensions in the Middle East and the likelihood of increased output from OPEC+ in August. The decline in prices comes amid an uncertain outlook for global demand, adding further weight to an already cautious market.

Around 9:15 AM, Brent crude futures for August delivery  dropped 13 cents, or 0.19 per cent, to $67.64 per barrel. The contract is set to expire later in the day, reported Reuters.

Meanwhile, the more actively traded September contract was down 18 cents at $66.62. US West Texas Intermediate (WTI) crude also declined, falling 32 cents, or 0.49 per cent, to $65.20 a barrel.

Despite experiencing their steepest weekly losses since March 2023 last week, both crude benchmarks are on track to end June higher. If current levels hold, June would mark the second straight month of gains exceeding 5 per cent.

Geopolitical Risk Premium Evaporates as Market Eyes OPEC+ Meeting

Prices surged earlier in June when conflict broke out following Israel’s strike on Iran’s nuclear facilities on June 13. The escalation saw Brent prices soar above $80 per barrel. However, following US airstrikes on Iran and the subsequent ceasefire agreement announced by President Donald Trump, prices dropped sharply to $67. According to IG Markets analyst Tony Sycamore, “The market has stripped out most of the geopolitical risk premium built into the price following the Iran-Israel ceasefire.”

Further downward pressure came from expectations of higher supply. Four delegates from OPEC+ indicated the group is prepared to raise output by 411,000 barrels per day in August. This follows similar increases in May, June, and July, marking the fifth consecutive monthly hike since the alliance began phasing out production cuts in April. The group is scheduled to meet on July 6 to finalise its next steps.

Demand Concerns Persist Amid Global Economic Uncertainty

While supply-side dynamics are contributing to lower prices, concerns around demand remain a key factor. Analysts continue to warn that sluggish economic performance in key markets could limit any upside for crude.

“Uncertainty around global growth continues to cap prices,” noted Priyanka Sachdeva, senior market analyst at Phillip Nova. One of the major concerns comes from China, where factory activity contracted for the third month in a row in June. Domestic demand remains weak, and external pressures, particularly trade tensions with the US, are weighing on manufacturers.

In the US, signs of reduced output potential also emerged. Oilfield services firm Baker Hughes reported that the number of operational oil rigs dropped by six to 432 last week, marking the lowest level since October 2021. Though this may point to some future supply moderation, the broader market remains heavily influenced by immediate-term demand and geopolitical developments.