Oil prices dip amid supply concerns and geopolitical developments

[WORLD] Oil prices edged lower on Tuesday, shedding around 1%, as investors grew wary of a potential supply surplus following signs of progress in US-Iran negotiations and ahead of a key Opec+ meeting expected to address production levels.

Brent crude futures settled at US$64.09 a barrel, down 65 cents or 1%, while US West Texas Intermediate (WTI) crude dropped 64 cents, or roughly 1.04%, to close at US$60.89 a barrel.

The energy market has been closely monitoring ongoing discussions between the United States and Iran. A breakthrough in nuclear talks could pave the way for a rollback of sanctions on Tehran, enabling it to boost oil exports. Given Iran's status as a major global producer, any increase in its supply capacity would likely weigh heavily on prices.

While Opec+—the alliance of the Organization of the Petroleum Exporting Countries and its partners—is not expected to announce any immediate policy shifts at its meeting on Wednesday, all eyes are on a subsequent gathering scheduled for Saturday. Market watchers are anticipating that the group may opt to ramp up output for July, a move that could further pressure prices by adding to existing supply concerns.

Three Opec+ delegates told Reuters that the group is leaning towards accelerating output increases at Saturday’s session, adding to the bearish sentiment in the market.

Adding to the oversupply narrative, a preliminary Reuters poll suggested US crude inventories rose by about 500,000 barrels last week, reinforcing perceptions that supply continues to outpace demand.

The fifth round of US-Iran talks concluded in Rome last week with limited progress. Though some headway was made, key sticking points remain unresolved—particularly the contentious issue of uranium enrichment.

“Opec+ also meets next week where they will likely agree on further output increases, which, if it occurs, will be a major near-term headwind for crude, especially if Iran adds barrels in the possible (US) deal,” said Dennis Kissler, senior vice president of trading at BOK Financial.

Should negotiations between Washington and Tehran stall, sanctions would remain in place, restricting Iranian oil exports. However, any resolution could quickly introduce additional barrels into the market, exacerbating the current supply glut.

On a more supportive note, President Donald Trump's decision to extend trade negotiations with the European Union until July 9 eased fears of imminent tariffs that could dampen global fuel demand. The delay in trade hostilities helped buoy broader markets, with Wall Street registering gains on the back of the reprieve.

UBS analyst Giovanni Staunovo said the easing trade tensions provided modest support for oil, though he cautioned that any upside in prices would remain capped until clarity emerges from the upcoming Opec+ decision.

Also lending temporary support, a wildfire in Alberta, Canada, led to the suspension of some oil and gas production, offering a brief counterweight to the broader supply concerns.