Oil prices moved higher on Tuesday as traders shifted their attention from easing tensions in the Middle East to global production levels and future demand.
Brent crude futures increased by 28 cents, or 0.39%, to $72.29 per barrel. U.S. West Texas Intermediate (WTI) crude also gained 29 cents, or 0.26%, reaching $68.84 per barrel at 0046 GMT.
The rise followed a decline on Monday, when prices returned to levels recorded before the Iran conflict. Investors are now watching how increased supply and changing demand patterns could affect the market.
Tim Waterer, chief market analyst at KCM Trade, said recent supply improvements have reduced some pressure on prices but uncertainty remains due to ongoing U.S.-Iran relations.
“The steps towards recovery in supply have eased the immediate risk premium, but the market remains wary of putting too much faith in the stability of the current truce given the on-again-off-again nature of U.S.-Iran relations,” he said.
Market participants are also following discussions between the United States and Iran over shipping activity through the Strait of Hormuz, while monitoring the return of oil exports from Gulf producers.
The United Arab Emirates increased crude output above 3.8 million barrels per day in June, its highest level since April 2020, according to Reuters estimates. The production level was also above figures recorded before the Iran conflict after the country moved away from OPEC+ limits in May.
Waterer said investors would be looking closely at demand signals, particularly from China, as previous supply-related developments have already influenced prices.
“We will be watching for early signs of demand response, particularly from China. The market has priced in a lot of the positive supply news, so the next leg in oil prices will depend on whether physical reality matches the optimistic headlines,” Waterer added.
The Organisation of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, have agreed to raise production targets by 188,000 barrels per day from August. The decision follows similar increases announced for June and July.
Meanwhile, Saudi Arabia has lowered the August official selling price of its Arab Light crude for Asian buyers by $11. The adjustment places the price at $1.50 per barrel below the Oman/Dubai average and marks the largest reduction in more than two decades, according to a Saudi Aramco pricing statement released on Monday.
