Oil Prices Climb Despite OPEC+ Output Hike Amid Strong Demand and Geopolitical Tensions

Oil prices rose nearly 2% on Monday as robust demand, particularly in the U.S. travel sector, outweighed the larger-than-expected OPEC+ output hike of 548,000 bpd for August. Brent settled at $69.58 and WTI at $67.93 after early-session lows. Analysts noted that actual supply increases remain modest, mostly driven by Saudi Arabia, and a final September hike of 550,000 bpd is expected. Saudi Arabia also raised August prices for its flagship Arab Light crude, signaling confidence in demand. Meanwhile, uncertainty around U.S. tariffs, a Houthi attack sinking a ship in the Red Sea, and geopolitical developments involving Iran and Israel added further support to prices.

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OPEC+ to Finalize Major Output Cut Reversal in September, Sources Say

OPEC+ is expected to approve another large oil production increase of around 550,000 bpd for September, completing the unwinding of 2.17 million bpd in voluntary cuts by eight members. This move also aligns with the UAE’s shift to a higher production quota, adding 300,000 bpd to its output. Since April, the group has steadily increased supply despite falling oil prices, responding to both market share concerns and pressure from U.S. President Trump to lower fuel prices. The September increase would mark a total rise of 2.47 million bpd, nearly 2.5% of global demand, bringing Saudi Arabia's output near 10 million bpd and the UAE’s to 3.375 million bpd. Although longer-term cuts totaling 3.66 million bpd remain in place until 2026, the group’s accelerated approach has allowed the UAE to reclaim output more quickly than originally planned.

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Houthis Claim First Ship Sinking of 2025 in Renewed Red Sea Attack

Yemen’s Iran-backed Houthis claimed to have sunk the Liberian-flagged bulk carrier Magic Seas in their first attack of the year in the Red Sea, using drones, missiles, and explosive-laden boats. The ship’s Greek operator, Stem Shipping, could not confirm the sinking, but said all 22 crew members were rescued by a UAE vessel and are safe. The Magic Seas was carrying iron and fertilizer from China to Turkey when it was hit, ending six months of relative calm in one of the world's busiest shipping lanes. The Houthis said they targeted the vessel after ignored warnings, as part of their ongoing campaign tied to solidarity with Palestinians in Gaza. Meanwhile, Israel launched strikes on Houthi-controlled ports, though it is unclear if the actions were connected.

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Iraq Targets Fuel Self-Sufficiency and Exports with Refinery Upgrades

Iraq plans to become self-sufficient in gasoline production by the end of this year and aims to export surplus oil products following refinery expansions. Prime Minister Mohammed Shia Al-Sudani said ongoing projects, including a new catalytic cracking unit at the Basrah refinery and the Diwaniya refinery expansion, are critical to reducing fuel imports. Iraq, despite being OPEC’s second-largest oil producer, has long lacked the refining capacity to convert more of its crude into valuable products. Additional refinery upgrades in Maysan and Najaf will also contribute to generating exportable surplus. By 2030, Iraq intends to process 40% of its crude domestically for higher-value products or industrial use.

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Trump Targets Wind and Solar Subsidies in Executive Order

President Donald Trump signed an executive order on Monday directing federal agencies to phase out tax credits for wind and solar energy projects. He criticized renewable energy as unreliable, expensive, and harmful to the environment and electric grid, while also highlighting its reliance on foreign supply chains. The order enforces provisions in the “One Big Beautiful Bill Act,” which ends renewable energy tax credits after 2026 unless construction begins earlier. The Treasury Department must ensure the rollback of these credits, while the Interior Department is tasked with reviewing policies that favor renewables. Both agencies are required to report their actions to the White House within 45 days.

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U.S. Gulf Coast Fuel Oil Imports Hit Record Low as Refiners Shift to Heavier Crude

Fuel oil imports into the U.S. Gulf Coast fell to a record low of 213,000 bpd in June, as refiners increasingly opted for heavy, sour crude due to tighter global fuel oil supplies and higher prices. The shift was driven by reduced Mexican crude deliveries and rising seasonal power demand in the Middle East, along with long-term impacts from U.S. sanctions on Russian oil. High-sulfur fuel oil became less economically attractive, with a $4.20 per barrel premium over Mexico’s Maya crude in May, prompting refiners to favor heavy crude inputs instead. Analysts noted a broader trend of U.S. refiners reducing reliance on imported fuel oil in favor of domestic production and reconfigured operations to handle more heavy crude. As a result, Gulf Coast fuel oil inventories dropped to 10.63 million barrels last week, the lowest level since 1996.

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Russia Falls Short of OPEC+ Crude Target in June Despite Output Gains

Russia produced 9.022 million barrels of crude oil per day in June, falling short of its OPEC+ quota by 28,000 barrels, marking its largest monthly shortfall this year. The target, adjusted for a pledged compensation cut of 111,000 barrels per day, stood at 9.050 million barrels. Despite historically poor compliance, Russia has improved its adherence to OPEC+ production cuts, under pressure from Saudi Arabia. This underproduction comes as eight OPEC+ members agreed to raise output by 548,000 barrels per day in August, amid strong seasonal demand. Due to sanctions, Russia no longer publishes official output data, forcing analysts to rely on seaborne exports and domestic refinery indicators.

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OPEC Production Hike Supports Positive Tanker Rate Outlook Despite Short-Term Lulls

OPEC’s decision to raise oil production by 548,000 barrels per day in August, with a similar increase expected in September, is expected to boost tanker demand and rates in the coming months. Analysts note that much of the new supply, mainly from Saudi Arabia, will add to seaborne exports, increasing tanker volumes especially for VLCCs heading to the Far East. Despite previous production increases failing to immediately lift tanker rates, recent export data from the Middle East shows rising shipments, signaling strengthening market fundamentals. Current tanker rates have softened somewhat but remain influenced by growing crude volumes and anticipated Atlantic basin production increases. Overall, the outlook for tanker earnings is positive for the latter half of the year as these production hikes translate into higher shipping demand.

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BRS Skeptical of VLCC Shift to Clean Product Trades Amid Fragile Economics

Shipbroker BRS has cast doubt on the likelihood of a trend in which VLCCs, traditionally used for crude, are cleaned to carry refined products, despite one such instance involving Okeanis Eco Tankers’ Nissos Keros now loading gasoil for TotalEnergies. While some analysts and sources see potential in using VLCCs for clean product backhaul voyages, BRS’s Andrew Wilson questions the profitability, citing high cleaning costs and low hire rates compared to LR2 tankers. VLCC spot rates have weakened recently, and newbuild crude tankers, which often start service with clean cargoes, could already meet any East-to-West product demand. Furthermore, upcoming deliveries of suezmax, LR2, and aframax vessels are expected to reduce the need for repurposed crude tankers. Overall, BRS does not anticipate a widespread move to convert dirty VLCCs or suezmaxes to clean trades in the near term.