Oil slips after OPEC+ raises production quotas

HONG KONG

Oil prices slipped on July 6 after OPEC+ announced on July 6 that seven of its members plan to expand oil production by a combined total of 188,000 barrels per day in August. It was the fifth consecutive month OPEC+ members have agreed to raise output.

The countries increasing their output are Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman.

Uncertainty over supplies persists as talks with Iran aimed at fully reopening the Strait of Hormuz appear to be on hold during funeral ceremonies for Ayatollah Ali Khamenei , which will continue for several days.

In energy trading early on July 6, Brent crude, the international standard, lost 25 cents to $71.87 a barrel. U.S. benchmark crude lost 10 cents to $68.59 a barrel.

SPI Asset Management’s Stephen Innes warned the benefits could take some time to feed through the economy.

“Energy knock-on effects rarely arrive all at once,” he wrote. “First crude moves, then freight, transport, consumer confidence, corporate margins, inflation expectations, and eventually the questions central bankers would rather avoid.

“A few more tankers moving safely through Hormuz may take the edge off the immediate panic premium, but it does not undo the cost pressures already working their way through the global economy.”

And Dr. Karsten Junius, chief economist at Bank J. Safra Sarasin, added: “Oil exports remain well below pre-war levels and bottlenecks are likely to persist.

“Meanwhile, efforts to re-build strategic and commercial reserves should support demand. As a result, oil prices are likely to settle around $75-$80 a barrel over the coming year, keeping the inflation trajectory more elevated this year.”