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(Bloomberg) — Oil fell as energy flows through the Strait of Hormuz persisted and OPEC+ signaled higher supplies, fanning concerns about a potential glut.
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Brent dropped below $72 a barrel, while West Texas Intermediate was near $68. Oil and gas shipping along a US-protected corridor in the waterway showed signs of recovering Sunday, a day after several vessels had performed unexplained U-turns and detours in the vital energy corridor.
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Separately, OPEC+ members backed another modest rise in collective quotas for next month, with seven nations led by Saudi Arabia and Russia agreeing to add 188,000 barrels a day in a further roll-back of curbs made a few years ago. At present, those extra barrels are theoretical, but the group’s decision signals a desire to add output as conditions in the region continue to normalize.
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Brent crude collapsed by 30% in the second quarter as Washington and Tehran agreed to an interim peace deal, clearing the way for a brisk — even if yet incomplete — resumption of traffic via Hormuz. Against that backdrop, Wall Street banks have forecast that prices have scope to slump further this half, with Citigroup Inc. flagging the possibility of a return to $60 by year-end.
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Major Persian Gulf producers have been ramping up output at a rapid clip. Among them, Saudi Arabia’s exports have already surged close to their pre-war levels as the kingdom gets its tankers through Hormuz. The United Arab Emirates — which quit OPEC during the conflict — also restored flows.
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In signs output is now topping demand, timespreads for benchmarks Brent and Dubai have flipped into a bearish contango pattern — when nearby contracts trade at a discount to longer-dated ones. Many grades on the physical market are also trading at prices cheaper than underlying benchmarks.
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At the weekend, Iran began a mass funeral for late Supreme Leader Ayatollah Ali Khamenei in a ceremony in Tehran. Khamenei was killed in a US and Israeli attack on the first day of the US-Israeli war in late February.
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