The Middle East risk premium diminishes, coupled with OPEC+ production increase expectations, crude oil faces multiple bearish factors.

Noticeably, oil prices fell on Monday, as the easing of Middle East geopolitical risks and the prospect of OPEC+ potentially increasing production again in August improved supply expectations, while global demand outlook remains uncertain. As of the time of writing, the August Brent crude oil futures, which are due to expire on the same day, fell by 12 cents to $67.65 per barrel, a decrease of 0.18%; the more active September contract reported $66.56, down by 24 cents. U.S. West Texas Intermediate (WTI) crude oil dropped by 36 cents to $65.16 per barrel, a decrease of 0.55%. Last week, both benchmark oil prices recorded the largest weekly decline since March 2023, but June is still expected to end with a second consecutive month of over 5% increase. The 12-day war sparked by Israel's attack on Iran's nuclear facilities on June 13 had previously pushed up Brent oil prices. Following U.S. bombings of the Iranian nuclear facilities, oil prices briefly surpassed $80 per barrel, but subsequently fell back to $67 as President Trump announced a ceasefire between Iran and Israel. "The market has largely priced out most of the geopolitical risk premium in oil prices following the Iran-Israel ceasefire," said Tony Sycamore, an analyst at IG Markets. Representatives of OPEC+ announced plans to increase production by 411,000 barrels per day in August, continuing the production increases seen in May, June, and July, further putting pressure on oil prices. OPEC+ is scheduled to meet on July 6, marking the alliance's fifth monthly increase in production since gradually exiting production cuts started in April. Baker Hughes data shows that the number of active oil drilling rigs in the U.S. decreased by 6 to 432 last week, reaching a new low since October 2021, indicating potential future production levels.