Oil prices are expected to fall for the week as OPEC+ plans to increase daily output, contributing to market concerns of oversupply.
The US dollar gained strength following the passage of a new budget bill that includes significant spending cuts and tax reductions, putting further pressure on oil prices.
Demand for US crude oil storage has surged amid expectations of increased OPEC+ supply, and rising US oil inventories have added to bearish sentiment among traders.
Crude oil prices were set for a weekly decline today, following a report that OPEC+ was planning to add another 411,000 barrels daily to its output in July in an extension of its accelerated rollback of output controls.
At the time of writing, Brent crude was trading at $64.06 per barrel, with West Texas Intermediate at $60.80 per barrel. Both were down by some 2% from Monday. According to a Reuters report, a stronger U.S. dollar contributed additionally to the weekly trend in oil prices.
The dollar rally came on the back of Congress passing the “one big, beautiful deal” for the federal budget, which features significant spending cuts, notably in the energy department and even more notably in the energy transition department.
The budget bill puts an end to most transition subsidies including wind, solar, and EVs, which, according to commentators and the industry will effectively put an end to the transition in the United States. Yet the news was good for the U.S. currency as the bill also envisages substantial tax cuts, which markets took as good news.
In further bearish news for crude oil prices, Reuters reported that demand for crude oil storage capacity in the U.S. had ballooned in recent weeks as traders anticipate an increase in OPEC+ supply.
Citing data from storage broker The Tank Tiger, Reuters reported demand for storage had almost doubled over the past month, with June demand seen at 3 million barrels. “We have not seen this kind of an uptick in crude storage demand since the COVID-19 pandemic,” the chief operating officer of The Tank Tiger told Reuters.
In further negative news for prices, U.S. crude oil inventories booked another weekly climb, which invariably sours trader sentiment as it is automatically taken to mean weaker demand regardless of size. For last week, the EIA reported a stock build of 1.3 million barrels.
By Irina Slav for Oilprice.com
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