OIL FUTURES: Crude prices drop as OPEC+ continues to pursue market dominance

Crude oil futures moved lower in midafternoon Asian trade July 7 as news of OPEC+'s output hike decision was larger than the market's anticipated levels, and trade news continued to weigh on sentiment.

At 2:44 pm Singapore time (0644 GMT), the ICE September Brent futures contract was down 15 cents/b (0.22%) from the previous close at $68.15/b, while the NYMEX August light sweet crude contract was down 13 cents/b (0.20%) from the previous close at $66.37/b.

OPEC+, which was previously expected to hike crude oil production by 411,000 b/d in August, announced a 548,000-b/d hike instead July 5, rattling the market and lending weakness to crude oil futures prices.

"Another larger than expected bump-up (restoration) in crude output by 548,000 b/d by OPEC+ sets the stage for tamer summer oil price volatility and softer crude or energy further out," Vishnu Varathan, managing director at Mizuho said.

Analysts attributed OPEC+'s decision to its desire to pursue market share.

"Fact is, the OPEC+ is bent on restoring the 2.2 million b/d that it voluntarily removed from markets earlier, and likely sooner rather than later. A key catalyst at work, as we highlighted back in April, is the Saudi-led resolve to reclaim market share lost, as it races to ensure energy market dominance not lost irredeemably," Varathan added.

The organization is also considering hiking production similarly by 548,000 b/d in September, further adding to bearish sentiments.

"The 2.2 million-b/d restriction that was put in place in 2023 will be fully restored a year earlier than initially planned. There will then remain a separate tranche of 1.6 million b/d in capacity -- representing additional voluntary cuts by key members -- before the supply cut strategy is entirely unwound," Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said.

On the geoeconomic front, US President Donald Trump announced a delay in the imposition of universal tariffs to Aug. 1 -- pushed back from the original date of July 9.

Trump also threatened to impose an additional 10% tariff on countries that align themselves with BRICS' "anti-American policies."

"The trade drama is probably not going away anytime soon. That uncertainty will continue to cloud visibility ... And you can't count on the tariffs announced in the next few hours staying unchanged for more than a day. That's just the reality -- and the latest headlines aren't pointing to a smooth ride," Ozkardeskaya said.

Still, possibly capping losses in the crude oil complex, Israel launched airstrikes at Houthi targets in Yemen earlier July 7.

Israeli Prime Minister Benjamin Netanyahu is scheduled to meet with Trump July 7 to discuss a new Gaza ceasefire deal.

Dubai crude

Dubai crude swaps and intermonth spreads were mixed during midafternoon Asian trading July 7.

The September Dubai swap was pegged at $66.17/b at 2:20 pm Singapore time (0620 GMT), down 31 cents/b (0.47%) from the previous Asian close.

The August-September Dubai swap intermonth spread was pegged at 97 cents/b, 2 cents/b wider over the same period, and the September-October Dubai swap intermonth spread was pegged at 64 cents/b, 2 cents/b wider.

The September Brent-Dubai exchange of futures for swaps was pegged at $1.86/b, 5 cents/b narrower over the same period.