Oil prices fell on Monday as the Organization of the Petroleum Exporting Countries and allies (OPEC+) announced an output increase amid a recovery in maritime traffic through the Strait of Hormuz. Brent crude dropped by $1.02, or 1.41%, settling at $71.10 per barrel, while US West Texas Intermediate decreased by $0.80 to $67.89.

OPEC+ Production Adjustments

On Sunday, OPEC+ officials, led by key members Saudi Arabia and Russia, consented to raise collective oil production by 188,000 barrels per day, effective from August 2026. This decision continues the trend of gradual output increases set previously for June and July. The production hikes follow a series of reductions in output that the group had implemented in prior years. Seven major member countries supported this latest adjustment.

Shipping in the Strait of Hormuz

Shipping activity through the Strait of Hormuz is showing signs of recovery, which had been disrupted due to the US-Isaieli conflict with Iran. For instance, even with the increase in output, actual production from major oil-producing nations, including Saudi Arabia, Kuwait, and Iraq, remained limited during this period. Recent reports indicate that merchant vessels have resumed operations in the US-protected transit corridor of the waterway.

In June, oil exports from the Gulf surged by over 3 million barrels compared to May. However, the total still remained approximately 40% lower than pre-conflict levels, highlighting ongoing production constraints despite the uptick.

Future Oil Demand Trends

Financial analysts at ANZ Bank project a contraction in global oil demand by roughly 1.5 million barrels per day in 2026, with potential annual declines reaching as high as 4 million barrels per day in the second quarter, based on preliminary data.

PVM analysts noted that oil producers appear to be "selling into a falling market," with little indication of a forthcoming price recovery. The Abu Dhabi National Oil Company reported sales of nearly 16 million barrels at larger discounts in spot tenders since June, reflecting a significant increase in supply availability. Additionally, Russian shipments through western ports reached record levels in June, expected to persist in July as geopolitical tensions continue to affect internal processing.

The market structure has been leaning bearish, further complicating outlooks for pricing recovery in the near term.