Oil Market Outlook: Key Factors Influencing Prices

Recap: The oil market remained in its consolidation pattern on Tuesday amid the expectations that OPEC+ will announce an output hike for August at an upcoming meeting, while the market also awaits the outcome of negotiations between the U.S. and its trading partners. The market posted a low of $64.67 in overnight trading before it erased its losses and traded to a high of $65.98. The market’s main focus is 411,000 bpd production increase that OPEC+ is expected to announce for August at its meeting on July 6th. Also, supporting the market was a weaker U.S. dollar, which fell to a 3-½ year low. The market was supported after Iran moved to cut off communication with the IAEA. The market, however, erased its gains once again and traded in sideways trading range during the remainder of the session. The August WTI contract settled up 34 cents at $65.45 and the September Brent contract settled up 37 cents at $67.11. The product markets ended the session in mixed territory, with the heating oil market settling down 1.89 cents at $2.3269 and the RB market settling up 3.06 cents at $2.1003.

Technical Analysis: The oil market will continue to trade within its recent trading range as it awaits for the OPEC+ decision on July 6^th and any progress on trade talks between the U.S. and its trading partners ahead of July 9^th, when the reciprocal tariffs are expected to take effect following the 90 day pause after President Trump on Tuesday said he was not thinking about extending the deadline. On Wednesday, the market will find some support from the EIA’s weekly petroleum stocks reports, which are expected to show draws across the board, with a draw of 1.8 million barrels in crude stocks. The market is seen finding support at $64.67, $64.50, $64.00, $63.77, $63.54-$63.51 and $63.40. Meanwhile, resistance is seen at $65.98, $66.09, $66.42 and $67.83.

Fundamental News: U.S. President Donald Trump said he plans to full up the U.S. SPR when the market conditions are right.

The Financial Times reported that top U.S. trade officials are now seeking narrower agreements with other countries to secure deals before President Donald Trump’s July 9^th tariff deadline. The FT said countries that agree on narrower deals would be spared the harsher reciprocal tariffs, but left with an existing 10% levy while talks on other issues continue. President Trump’s reciprocal tariffs are set to kick in on July 9^th, after a 90-day pause.

Morgan Stanley said Brent crude will likely retrace to around $60/barrel by early next year, with the market being well supplied and geopolitical risk abating following the Israel-Iran de-escalation. The bank added that it sees strong supply growth from non-OPEC countries over 2025-26 in the order of 1 million bpd each year, which would be enough to meet demand growth in the period. It said OPEC continues to unwind its production quota cuts and still expect an oversupply of about 1.3 million bpd in 2026.

OPEC+ is expected to approve another output hike on Sunday in a move that would fast-track plans to unwind production cuts a full year ahead of the original schedule. Key members of the alliance have already agreed to a 411,000 bpd increase, three times the initially planned volume, for May, June and July. Another increase in August would mark the fourth consecutive month of large increases, leaving the market well-supplied through year-end. If approved, the hike would push total supply increases since April to nearly 1.8 million barrels a day. The key eight OPEC+ members meeting virtually on Sunday are Saudi Arabia, Russia, Iraq, the U.A.E., Kuwait, Kazakhstan, Algeria, and Oman. Saudi Arabia will take the majority share of the increases.

Kpler data showed that Saudi Arabia increased its crude exports in June by 450,000 bpd from May’s level to its highest level in more than a year. Saudi crude exports increased to 6.33 million bpd in June from 5.88 million bpd in May.

U.S. Federal Reserve Chair Jerome Powell reiterated the U.S. central bank plans to “wait and learn more” about the impact of tariffs on inflation before lowering interest rates.

Early Market Call – as of 8:35 AM EDT

WTI – Aug $66.20, up 67 cents

RBOB – Aug $2.1110, up 1.27 cents

HO – Aug $2.3514, up 1.51 cents

Download Attachment

This market update is provided for information purposes only and is not intended as advice on any transaction nor is it a solicitation to buy or sell commodities. Sprague makes no representations or warranties with respect to the contents of such news, including, without limitation, its accuracy and completeness, and Sprague shall not be responsible for the consequence of reliance upon any opinions, statements, projections and analyses presented herein or for any omission or error in fact. The views expressed in this material are through the period as of the date of this report and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance or results and actual results or developments may differ materially from those projected. The whole or any part of this work may not be reproduced, copied, or transmitted or any of its contents disclosed to third parties without Sprague’s express written consent.