Oil prices edged lower in early Asian trading on Monday after President Trump announced the U.S. would guide ships through the Strait of Hormuz and OPEC+ confirmed a modest output increase.
At the time of writing, WTI crude was down 0.65% at $101.30, while Brent crude had dropped 0.39% to $107.80.
The President took to social media on Sunday to announce that “Project Freedom” would begin on Monday morning, Middle Eastern time. The project will involve the U.S. guiding stranded vessels out of the Strait of Hormuz. He emphasized that the stranded ships would be from “areas of the world that are not in any way involved” with the conflict in the Middle East.
In the same post, Trump described the discussions with Iran as “very positive”, suggesting they could lead to broader de-escalation. U.S. Central Command confirmed the operation would involve significant military support, including over 100 land and sea-based aircraft, and 15,000 personnel.
The announcement appears to have at least temporarily tempered some of the geopolitical risk concerns that sent prices spiking last week.
Adding to the downward pressure on prices, OPEC+ confirmed on Sunday a modest production increase for June. The group said seven members would raise output targets by 188,000 barrels per day, marking the third consecutive monthly increase.
In reality, actual supply from OPEC+ members remains severely restricted as the Hormuz disruption has sharply curtailed exports from Saudi Arabia, Iraq, and Kuwait. The UAE, which announced its decision to exit the group last week, has also seen its production curtailed by the conflict.
Even if shipping lanes reopen, it will likely take months for flows to normalize, meaning the OPEC+ announcement (like the UAE’s decision to leave the group last week) is only relevant for mid- to long-term oil market outlooks.
For now, traders are pricing in tentative optimism over a diplomatic breakthrough and an increase in tanker traffic through the Straight, but any sustained recovery in supply hinges on a durable agreement, which appears a long way off.
By Josh Owens for Oilprice.com
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