Oil prices held steady on Monday as easing geopolitical tensions in the Middle East offset market pressure from a potential OPEC+ production increase in August and ongoing uncertainty over global demand.

Brent, WTI Hold Gains After Recent Volatility
Brent crude futures were unchanged at $67.76 a barrel as of 0918 GMT, ahead of the expiration of the August contract later in the day. The more active September contract rose by 17 cents to $66.97. U.S. West Texas Intermediate (WTI) crude edged up 9 cents, or 0.1%, to $65.61 per barrel.

Despite recording their largest weekly drops since March 2023 last week, both benchmarks remain on track for a second consecutive monthly gain of over 5%.

Oil prices surged above $80 a barrel earlier in June amid a 12-day conflict that began on June 13 with Israeli strikes on Iranian nuclear facilities. However, prices retreated as the risk of wider conflict subsided.

Focus Shifts to OPEC+ Meeting and Output Outlook
Analysts say the market has returned to a range-bound trading environment, awaiting new economic data or signs of supply disruption. "The market is back to a range-trading environment that is likely to continue until new economic growth concerns emerge or supply disruptions materialize," said UBS analyst Giovanni Staunovo.

According to four OPEC+ sources cited by Reuters, the alliance is expected to increase output by 411,000 barrels per day (bpd) in August, continuing similar hikes made in May, June, and July. The group is scheduled to meet on July 6.

Tamas Varga of PVM Associates warned that if the group proceeds with the planned increase, global and OECD oil inventories may rise, limiting further price gains.

Tight Market Conditions Persist Despite Higher Output
While production is rising, Staunovo noted that the market remains relatively tight due to lower-than-expected output increases and stable exports from OPEC+ nations.

A Reuters survey found that OPEC oil production did rise in May, but gains were constrained by cuts from countries previously overproducing. Saudi Arabia and the United Arab Emirates also increased output below their respective quotas.

Demand Concerns Weigh on Sentiment
Market sentiment remains cautious due to concerns over weakening global oil demand, particularly from China, the world’s largest crude importer. Analysts warn that bearish pressure may persist if demand indicators continue to soften.