Oil prices fell on Monday as an easing of geopolitical risks in the Middle East and the prospect of another OPEC+ output hike in August improved supply expectations amid persistent uncertainty over the outlook for global demand.
Brent crude futures fell 13 cents, or 0.19%, to $67.64 a barrel by 0344 GMT, ahead of the August contract's expiry later on Monday. The more active September contract was at $66.62, down 18 cents.
U.S. West Texas Intermediate crude dropped 32 cents, or 0.49%, to $65.2 a barrel.
Last week, both benchmarks posted their biggest weekly decline since March 2023, but they are set to finish higher in June with a second consecutive monthly gain of more than 5%.
A 12-day war that started with Israel targeting Iran's nuclear facilities on 13 June pushed up Brent prices, which surged above $80 a barrel after the U.S. bombed Iran's nuclear facilities and then slumped to $67 after President Donald Trump announced an Iran-Israel ceasefire.
The market has stripped out most of the geopolitical risk premium built into the price following the Iran-Israel ceasefire, IG markets analyst Tony Sycamore said in a note.
Further weighing on the market, four delegates from OPEC+, which includes allies of the Organization of the Petroleum Exporting Countries, said the group was set to boost production by 411,000 barrels per day in August, following similar-sized output increases for May, June and July.
OPEC+ is set to meet on 6 July and this would be the fifth monthly increase since the group started unwinding production cuts in April.
However, bearish pressure from concerns over slower global oil demand, particularly from China, is likely to persist.
Uncertainty around global growth continues to cap prices, said Priyanka Sachdeva, senior market analyst at Phillip Nova.
China's factory activity contracted for a third straight month in June, as weak domestic demand and faltering exports weighed on manufacturers amid U.S. trade uncertainty.
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Government bond markets from Tokyo to New York extended losses on Monday (18 May) as rising energy prices linked to the Middle East conflict heightened inflation concerns and reinforced expectations that major central banks could keep interest rates higher for longer.
Indian Prime Minister Narendra Modi has significantly reduced the size of his motorcade to save fuel, a government source said on Wednesday, days after urging citizens to adopt austerity measures amid surging energy prices linked to the Iran war.
The Strait of Hormuz remains a vital maritime chokepoint and serves as the primary artery linking the Persian Gulf to international energy markets. With approximately 20% of global oil and gas shipments transiting this waterway, it is the backbone of energy security for Asia, Europe, and beyond.
The decision by the United Arab Emirates to leave OPEC+ on 1 May has put renewed focus on one of the most influential groups in global energy - and how its decisions can shape oil prices worldwide.
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