Oil Prices Climb on Supply Jitters Despite OPEC+ Hike, Saudi Price Cut

Crude oil prices gained nearly 1% early Monday, with West Texas Intermediate (WTI) trading at $91.42 per barrel and Brent crude at $94.15, according to live market data. The gains come amid a complex backdrop of ongoing Middle East supply disruptions, a new OPEC+ production increase, and a significant price cut from Saudi Arabia targeting Asian buyers.

The market's primary support continues to be the closure of the Strait of Hormuz, which has severely constrained exports from key producers like Iraq and Qatar since the U.S. and Israeli war against Iran began in late February. According to an OilPrice.com report, Iraq's production has plummeted from over 4 million barrels per day to just 1.4 million as of May due to the tanker traffic blockage.

Despite this, OPEC+ on Sunday approved another nominal output hike of 188,000 barrels per day for July, adding to a series of increases totaling nearly 600,000 barrels daily since April. However, analysts note these hikes remain largely theoretical while the Strait of Hormuz is closed. "An OPEC+ production increase means very little while the Strait of Hormuz remains closed," a Rystad Energy analyst was quoted as saying by OilPrice.com.

In a move reflecting softer demand in key markets, Saudi Arabia slashed its official selling prices for July-loading crude. State oil giant Aramco cut the price of its flagship Arab Light crude for Asia by $6 per barrel, setting it at a $9.50 premium over Oman/Dubai prices, according to OilPrice.com. This is the second consecutive monthly price reduction.

Meanwhile, a scramble for alternative fuels is intensifying global energy competition. Indonesia's new export controls on commodities like coal have sent Asian coal prices to near two-year highs, according to OilPrice.com. With LNG production in Qatar damaged and Middle East gas trapped, coal demand has surged, particularly in Japan and South Korea, where April coal-fired power supply jumped 40%.

For Bakken operators, the price strength is tempered by a regional discount. The Bakken crude differential stood at -$3.42 versus WTI on Monday, meaning local crude is priced at a discount. The sustained high global benchmarks, driven by geopolitical risk, continue to support drilling economics in North Dakota. However, Saudi Arabia's aggressive price cuts to Asia could pressure global benchmarks if the Strait of Hormuz reopens, potentially leading to a rapid market shift from shortage fears to surplus concerns, as noted by analysts.