Oil Prices Near $66–$68 as Supply Surge and Tariff Shock Rattle Market

Oil Market Wavers as OPEC+ Output, Iran Diplomacy and Trump’s Tariff Shockwaves Collide

WTI (CL=F) and Brent (BZ=F) Retreat Amid Tehran Tensions and Supply Surge

Oil prices softened into the weekend with West Texas Intermediate (CL=F) sliding 0.88% to $66.41 and Brent crude (BZ=F) shedding 0.84% to $68.20. Holiday-thinned volumes masked underlying volatility triggered by expectations of another OPEC+ supply boost and fresh signals from Iran regarding nuclear cooperation. Reports confirm an imminent output hike of 411,000 barrels per day for August, marking a fourth consecutive increase as OPEC+ races to reclaim market share. Meanwhile, Iranian Foreign Minister Abbas Araghchi reaffirmed Tehran’s Nuclear Non-Proliferation Treaty commitments, even as Iran suspended cooperation with the IAEA under a new law.

Iran Nuclear Diplomacy Revives Risk Sentiment While U.S. Sanctions Cloud Supply

With nuclear negotiations expected to resume next week in Oslo, the potential easing of U.S.-Iran tensions temporarily calmed fears of Gulf supply disruptions. Yet the U.S. Treasury added pressure by sanctioning a network of companies smuggling Iranian oil, including vessels blending barrels with Iraqi crude. Iran, OPEC’s third-largest producer at 3.3 million bpd, remains critical to global flows. Any marginal easing of sanctions could reintroduce more barrels to market, pushing crude toward $65, especially with OPEC+ increases pending.

Tariff Cliff Approaches: Trump’s Trade Letters Threaten Demand Stability

Oil markets are now pricing in the July 9 tariff deadline with growing anxiety. U.S. President Donald Trump confirmed that new letters will be sent to 10 nations outlining 20–30% duties on exports. This abrupt pivot from bilateral negotiations threatens refined product flows and industrial demand. The “One Big Beautiful Law” tax reform, coupled with mounting $36.2 trillion U.S. debt, is sowing uncertainty. With Fed rate cuts off the table until at least September, oil demand expectations remain capped.

Geopolitical Premium Fades as Israel-Iran War Lacks Lasting Supply Shock

Despite a 13% spike after the Iran-Israel conflict erupted in June, both CL=F and BZ=F have retraced below pre-conflict levels. Ceasefire observance, along with unaffected Strait of Hormuz flows, undercut the war premium. Brent dropped to $66, even lower than its June 12 price. Edward Bell of Emirates NBD noted the market’s rapid refocus on structural demand and inventory dynamics.

Chinese Demand Lags While Strategic Reserves and Auctions Gain Momentum

Apparent oil demand in China, the world’s #2 economy, remains nearly 3% lower YoY through May 2025. Yet optimism surfaced as India began feasibility studies for new SPR caverns in Rajasthan, aiming to double strategic capacity. Brazil also seeks additional auction rounds following a $180 million concession success. Meanwhile, Venezuela’s flows to China now exceed 90% of its total exports, navigating sanctions-induced dependency.

US Drilling Sentiment Drops as Dallas Fed Survey Flags Q2 Contraction

Domestic oil production sentiment took a hit as the Dallas Fed revealed a sharp decline in Q2 oil and gas business activity. Nearly half of surveyed companies expect fewer wells drilled in 2025. This dovetails with subdued summer gasoline demand in the U.S., which fell to 8.6 million bpd. Combined with a surprise EIA crude build of 3.8 million barrels last week, bearish fundamentals weighed on prices.

OPEC+ Leans on Predictability While Barclays Sees Future Recovery

Eight-member OPEC+ cohorts are expected to finalize August’s 411,000 bpd hike on Saturday. Although largely priced in, any deviation could shock a fragile market. Janiv Shah of Rystad noted geopolitical risk premiums have evaporated, making fundamentals king. Still, Barclays upgraded its 2025 Brent forecast by $6 to $72, citing a stabilizing demand trajectory, and lifted 2026’s outlook to $70. Traders remain cautious as price direction hinges on OPEC+ coherence, Iran’s signals, and Trump’s global trade maneuvers.

BUY/SELL/HOLD VERDICT: BEARISH HOLD – VOLATILITY AND SUPPLY SURGES CAP UPSIDE

With CL=F hovering near $66 and BZ=F near $68, near-term upside appears capped by OPEC+ increases and tepid demand. Softness in China and the U.S., alongside looming tariff disruptions, points to persistent downside risk. Hold until post-July 9 developments clarify trade and policy direction.

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