Brent gains despite OPEC+ supply hike

The front-month ICE Brent contract has gained by $0.33/bbl on the day from Friday, to trade at $68.61/bbl at 09.00 GMT.

IMAGE: Pump jack and flag of OPEC. Getty Images

Upward pressure:

The total number of rigs drilling for crude oil and natural gas in the US fell by eight last week, bringing the count to 539 units, according to Baker Hughes.

Compared to the same period last year, the US rig count is down by 46 rigs, or approximately 8%.

This decline has raised some supply concerns and added upward pressure on Brent futures.

“The latest rig data from Baker Hughes shows that drilling activity in the US continues to slow… The dramatic drop in drilling activity leaves downside to US oil output through 2026,” noted two analysts from ING Bank.

Downward pressure:

Eight members of OPEC and its allies (OPEC+) have agreed to raise their collective crude oil supply by 548,000 b/d in August—an increase that exceeds prior expectations and has added downward pressure on Brent futures.

Oil prices are facing downward pressure “after OPEC+ agreed on a larger-than-expected supply hike,” analysts from ING Bank said in a note.

Oil prices are under pressure “in response to Saturday’s decision by the OPEC/non-OPEC Group of 8 to hike its collective production target for August by 548,000 b/d instead of 411,000 b/d as expected,” Vandana Hari, founder and analyst at Vanda Insights, added.

Additionally, US officials have signalled a delay in implementing the tariffs but have not provided clarity on the revised rates, according to a Reuters report. The US is finalising trade deals with some countries and will notify others of higher tariff rates by 9 July, with the new rates set to take effect on 1 August, the report said.

This has raised concerns that higher tariffs could dampen economic activity and reduce oil demand.

“A more bearish supply outlook, combined with demand uncertainty, doesn’t bode well for prices,” the ING Bank analysts concluded.

By Tuhin Roy

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