Oil prices fall on Opec+ output hike expectations and possible Iran talks

Producers group set to add 411,000 barrels per day for August

Opec's headquarters in Vienna. Opec+ members are set to meet virtually on Sunday to discuss output increase amid price volatility. Reuters

Oil prices fell on Friday on the expectation that Opec agrees to another increase in crude output over the weekend and that the possible resumption of US-Iran nuclear talks in Oslo will reduce risks to global supplies.

Brent, the benchmark for two thirds of the world's oil, fell 0.73 per cent to $68.3 a barrel at the market close on Friday, while West Texas Intermediate, the gauge that tracks US crude, dropped 0.75 per cent to $66.5 a barrel.

Brent settled about 0.8 per cent higher than last Friday's close and WTI was around 1.5 per cent higher.

“Bears are back in control this morning following reports that US-Iran nuclear talks are resuming and that Opec is expected to announce a production increase of 411,000 barrels per day this weekend,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said.

“While rising supply and softening demand suggest a move back below $65 per barrel, the strong support seen this week near that level hints that any downside might take longer to materialise.”

US news website Axios reported on Thursday that the US is planning to hold nuclear talks with Iran next week, with both White House envoy Steve Witkoff and Iranian foreign minister Abbas Araghchi will be in attendance in Oslo during the negotiations.

This came after Iran reaffirmed its commitment to the nuclear non-proliferation treaty on Thursday, a day after President Masoud Pezeshkian put into effect a law suspending co-operation with the UN nuclear watchdog, the International Atomic Energy Agency.

“Our co-operation with the IAEA will be channelled through Iran's Supreme National Security Council for obvious safety and security reasons,” Abbas Araghchi said in a post on X.

Opec is also expected to agree to raise output by 411,000 barrels per day for August on Sunday, when the member countries meet virtually. This will be the fourth consecutive monthly increase after similar agreements led by Saudi Arabia and Russia for May, June and July.

Janiv Shah, vice president of oil markets at Rystad Energy told The National that the Opec+ hike has been largely priced in, "as the market trades in a narrow band amid reduced risk premiums and geopolitical forces".

Oil prices rise as Iran suspends co-operation with IAEA

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Investors are also keeping a close eye on trade negotiations between the US and its trading partners.

“While geopolitical tensions in the Middle East have eased, broader concerns about weakening global demand and uncertainty around trade negotiations continue to weigh on sentiment,” Soojin Kim, research analyst at Japan's MUFG Bank, said.

“On the supply side, upcoming nuclear talks with Iran and newly announced sanctions on entities involved in oil trade are adding complexity.”

New US sanctions on Iran oil

On Thursday, the US Treasury imposed sanctions on networks that have collectively transported and purchased billions of dollars’ worth of Iranian oil as the US continues to pursue its maximum pressure campaign on Tehran to curtail its oil revenue.

Among the entities sanctioned were a network of companies run by Iraqi businessman Salim Ahmed Said that has “profited from smuggling Iranian oil disguised as, or blended with, Iraqi oil,” a statement posted on the department’s website said.

The US treasury also imposed sanctions on several vessels engaged in the covert delivery of Iranian oil to global markets.

Oil prices have remained volatile this year amid geopolitical tensions and tariffs announced by US President Donald Trump.

The tariffs unveiled in April had a bearish impact on oil prices because of concerns about demand and a slowdown in the global economy.

Geo-political tension between Iran and Israel and ensuing 12-day war pushed prices higher on supply disruption concerns, especially for crude transported through the Strait of Hormuz in the Arabian Gulf.

Fading geopolitical premium

Brent and WTI surged as much as 13 per cent after the conflict broke out between Iran and Israel on June 13. However, they fell in subsequent days as geopolitical premium faded and markets focused on fundamentals.

Iran is an important oil producing nation and is the third-biggest producer of oil among the Opec group. It producers about 3.3 million barrels a day.

“The Israel-Iran war sparked a sharp spike in geopolitical premiums for oil prices but as it became clear that there was no change to supply or shipments from the region and both parties observe a ceasefire, oil markets have quickly refocused their attention to fundamentals,” Edward Bell, acting group head of research and chief economist at Emirates NBD, said.

“At $66 per barrel as of the start of July, prices for Brent futures are now lower than they were ahead of the first attack on June 12.”

China demand concerns

Demand concerns in China, the world’s second largest economy, are also weighing on oil prices.

Apparent demand has been running nearly 3 per cent lower year on year for the first five months of 2025, despite economic momentum stabilising in the country, Mr Bell added.

The International Energy Agency last month said oil demand will grow by just 720,000 barrels per day in 2025, slower than in 2024, with only a marginal pickup next year.