Morning Highlights: Oil steady as market weighs OPEC+ hike and tariff risk

Tuesday, July 1, 2025

Oil prices held firm early Tuesday as investors assessed expectations for another OPEC+ production increase and awaited clarity on potential U.S. tariff hikes later this month.

Market snapshot (as of 6:45 EST):

• Brent (September): $67.26 (+$0.52)

• WTI (August): $65.61 (+$0.50)

After last week’s steep declines, prices are consolidating near $65–$67 as geopolitical risk premiums continue to unwind and attention shifts to fundamentals.

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OPEC+ set to extend output increases

The primary market focus is the July 6 OPEC+ meeting, where the alliance is widely expected to approve another 411,000 bpd production hike for August.

“The market is now concerned that the OPEC+ alliance will continue with its accelerated rate of output increases,” said Daniel Hynes, senior commodity strategist at ANZ.

Four OPEC+ sources told Reuters last week the group plans to maintain the same monthly pace of supply additions seen in May, June, and July. If confirmed, this would bring the year’s total increases to 1.78 million bpd, equivalent to more than 1.5% of global oil demand.

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Demand outlook mixed as trade deadline looms

Trade negotiations are another source of uncertainty.

U.S. Treasury Secretary Scott Bessent warned Monday that without final agreements, tariff rates could jump sharply on July 9, when the temporary 10% level expires and President Trump’s previously announced rates of 11–50% could be reinstated.

“Investors are watching these talks closely,” noted Saxo Bank’s Ole Hansen, who said prospects for successful deals were “partially offsetting” supply concerns.

Morgan Stanley sees scope for further downside, forecasting Brent futures to retrace toward $60 by early 2026 amid well-supplied markets and easing geopolitical tensions following the Israel-Iran ceasefire.

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Saudi OSPs likely to rise on summer demand

While futures prices have weakened overall, refiners expect Saudi Arabia to lift official selling prices (OSPs) for August barrels:

• Arab Light OSP: Expected to rise 50–80 cents, to $1.70–$2 per barrel over the Oman/Dubai average—the highest since April.

• Arab Extra Light, Medium, Heavy: Expected increases of 50–60 cents per barrel.

“Asian refiners have already requested more term crude for August and September,” said a trading source, citing strong summer fuel demand.

The spot market is reflecting the same tightness:

• Cash Dubai premium to swaps averaged $1.88 in June, 61 cents higher than May, despite volatility during the Middle East conflict.

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Conflict risk fading, but not gone

The 12-day war that erupted after Israel bombed Iran’s nuclear facilities briefly sent Brent over $80 per barrel, before prices slumped back to the low-$60s as a ceasefire took hold.

While concerns over a closure of the Strait of Hormuz have receded, analysts note the risk has not disappeared entirely, especially if Iran perceives further threats to its exports.

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Outlook

With the OPEC+ decision just days away and tariff deadlines approaching, the market is likely to remain range-bound in the $65–$70 zone barring a renewed escalation in the Middle East or a significant surprise in macroeconomic data.

“The market is back to trading fundamentals while monitoring any flare-ups that could trigger another geopolitical premium,” UBS analyst Giovanni Staunovo said.