Oil Prices Decline Amid Expectations of Increased "OPEC+" Production and Concerns Over Escalating Trade War

Oil prices witnessed a noticeable decline during trading on Tuesday, July 1, affected by expectations of increased production by the "OPEC+" alliance next month, in addition to concerns over global economic growth slowdown due to the possibility of the United States raising tariffs on some of its trading partners.

Data showed a 0.4% decrease in the futures contracts for Brent crude for September, bringing the price per barrel to $66.44, while West Texas Intermediate crude declined by about 0.5%, reaching $64.78 per barrel.

Experts expressed concerns about the continued policy of the "OPEC+" alliance in increasing production. Daniel Hynes, a commodity expert at "ANZ" bank, stated in a research note: "The market is concerned about the ongoing pace of the OPEC+ alliance in rapidly increasing production."

Sources within "OPEC+" revealed to Reuters last week the alliance's plan to increase production by 411 thousand barrels per day in August, following similar increases in May, June, and July. If this increase takes place, the alliance's total production additions by 2025 will reach 1.78 million barrels per day, equivalent to over 1.5% of global oil demand.

The group is scheduled to hold its next meeting on July 6, where discussions on future production policies are expected.

Increased uncertainty about U.S. trade policies added downward pressure on oil prices. U.S. Treasury Secretary Scott Bessent warned of the possibility of notifying some countries of a significant increase in tariffs soon, despite ongoing negotiations "in good faith," as he put it, before the temporary freeze ends on July 9.

If negotiations fail, tariffs will revert from 10% to the higher levels announced by U.S. President Donald Trump on April 2, ranging between 11% and 50%.

Morgan Stanley bank expects Brent crude prices to drop to around $60 per barrel early next year due to supply abundance and geopolitical tensions easing, especially after the de-escalation between Iran and Israel. It also pointed to the possibility of global supplies increasing by 1.3 million barrels per day by 2026.

Oil prices had recently risen to over $80 per barrel due to the war that broke out on June 13 following an Israeli attack on targets inside Iran, peaking after U.S. strikes on Iranian nuclear facilities. However, they quickly dropped to around $67 after Trump announced a ceasefire between the two countries.