(Julu 7): Oil held a drop on signs of growing oversupply, with Saudi Arabia slashing prices and traffic through the Strait of Hormuz picking up.
West Texas Intermediate traded below US$69 a barrel, after ending lower in the week’s opening session following a US holiday on Friday, while Brent closed near US$72. State producer Saudi Aramco will lower Arab Light oil to Asia for next month by US$11 a barrel to US$1.50 below a regional benchmark. The last two times it sold the grade at a discount were during price wars in 2020 and 2015.
The move by Riyadh follows a decision at the weekend by Opec+ members including Saudi Arabia to raise output quotas for next month, adding to the prospect of more supply. While those extra barrels remain theoretical, the decision signals a desire to raise production as conditions normalise.
Oil collapsed by 30% in the second quarter as Washington and Tehran agreed to an interim peace deal, easing concerns over supply disruptions from the Middle East. Global benchmark Brent has fully erased the war premium that had built up in recent months, with some leading banks including Goldman Sachs Group Inc and Morgan Stanley now warning there’s a risk a glut will return.
“We have a US$60 target on oil over the next month,” said Jay Hatfield, chief executive officer at Infrastructure Capital Management LLC. “Saudi posted price cuts normally reflect changes in market prices. We had already assumed that Opec would produce at maximum production to refill coffers.”
The Strait of Hormuz — which links Persian Gulf producers to global markets — has partially reopened following a near-total closure triggered by the war, with a convoy of at least eight Japan-linked ships among recent transits. Still, while traffic is gradually recovering, movements remain below pre-conflict levels.
See also: Oil steady as Hormuz flows persist and Opec+ flags higher supply
Prices:
- WTI for August delivery added 0.3% to US$68.72 a barrel at 6.47am in Singapore.
- Brent for September settlement closed 13 cents lower at US$71.99 a barrel on Monday.
Uploaded by Jason Ng
