06.07.202600:29 Forex Analysis & Reviews: Brent. Price Analysis. Forecast. The Market is Oversupplied with Immediate Delivery

The group of seven OPEC+ countries, which has controlled oil production volumes since the beginning of 2023, is preparing to continue the process of increasing quotas that was initiated after the U.S. and Israel struck Iran, provoking the recent conflict in the Middle East. At the same time, the United Arab Emirates (UAE), having left OPEC, has already launched exports of record volumes of crude oil.

According to anonymous sources at Reuters, OPEC (which includes Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan, and Oman) may increase production quotas by 188,000 barrels per day in August. This increase follows a similar one for July, which, unlike previous attempts, is more likely to be implemented.

Since the beginning of military actions, OPEC+ has repeatedly stated its intention to increase production; however, these statements have remained at the planning stage, as military actions in the Gulf and Iran's decision to close the Strait of Hormuz paralyzed production. This forced producers in the region to focus on stockpiling and ultimately begin well decommissioning. Iraq has particularly felt this situation acutely, with production volumes dropping from over 4 million to less than 2 million barrels per day.

Recent decisions to increase production are likely intended to calm traders and demonstrate the Gulf countries' readiness to ramp up output as the situation normalizes. Producers such as Russia and Kazakhstan, which were not affected by the closure of the Strait of Hormuz, also intend to increase supply to mitigate the oil deficit from the Middle East.

While the UAE has left OPEC, opting to act independently after six decades of membership, this has fueled forecasts of an immediate increase in their production volumes. They are currently focusing primarily on significantly increasing exports.

Last week, Reuters reported again that in June the UAE exported a record volume of crude oil, averaging 3.7 million barrels per day (according to Kpler). Analysts at Vortexa estimate exports were even higher, at up to 4 million barrels per day last month.

"The increase in exports can be explained by several factors, including the restoration of movement through the Strait of Hormuz, which has allowed blocked vessels to be unlocked," noted Johannes Rauball, a senior analyst at Kpler, in an interview with Reuters. "At the same time, we see an increase in supplies from the UAE; according to our estimates, they are close to pre-war volumes," he added.

However, the Kpler analyst emphasized that record volumes are partly facilitated by accumulated oil stored in tanks during five months of active hostilities. This means that as reserves are depleted and before actual production increases, supply volumes may shrink. The situation again raises the question that experts have been discussing for at least five years: has OPEC lost its influence?

Judging by Kazakhstan's recent statement that it has no plans to exit OPEC+ and Iraq's swift abandonment of its intention to withdraw from the organization to increase production, the answer remains negative for now. However, the fact that part of OPEC has lost its influence over the global oil market is undeniable, largely due to the U.S. becoming the largest oil producer. Interestingly, the UAE's decision to leave OPEC occurred amid stable competition from the U.S., which can quickly ramp up production, as evidenced by the record set in May (nearly 14 million barrels per day).

This situation creates constant pressure on oil prices, which is disadvantageous for all producers—neither the U.S., nor the UAE, nor OPEC+. Global benchmark prices have already returned to pre-war levels due to U.S. record output and reports of restored tanker movements through the Strait of Hormuz.

From a technical perspective, oil is trading below the important 200-day SMA. Oscillators are negative, confirming the bears' advantage. However, it is worth noting that the relative strength index has periodically entered oversold territory in recent days, indicating bearish consolidation or a pullback. Yet any pullback is likely to encounter resistance at the 200-day SMA, presenting a new opportunity to sell. If prices rise above this level, bulls may have a chance for further gains.