Oil prices fell on Tuesday in anticipation of an important meeting of the OPEC+ alliance, where a decision on increasing oil output is expected. Brent crude fell 31 cents to $64.42 a barrel, and U.S. West Texas Intermediate was down 30 cents at $61.23.
Analysts expect OPEC+ to maintain its current production policy for now, but a second meeting later this week could lead to a decision on further output changes in July. Reports indicate that an additional 400,000 barrels per day may be under consideration.
Market watchers claim that current prices have already reflected some of this potential increase. Some analysts also said that the downside is limited, given the uncertainty about what exactly OPEC+ would do.
Investors are also monitoring geopolitical developments closely. Negotiations with Iran on Tehran's nuclear program have not yielded a deal. Iran's president added that even if the negotiations fail, his country is ready for economic sanctions to snap back.
If no agreement is reached on a nuclear deal, it would probably mean that American sanctions against Iran would stay in place, and that would severely restrict Iran's ability to export oil. This has opened new doubts around future global supply levels.
There are also mounting fears of regional tensions in the Middle East, however. Current intelligence indicates that a military clash is possible if the nuclear negotiations fail. Rising speculation over potential attacks on Iranian targets has also contributed to oil market volatility.
In another development, the U.S. President extended trade negotiations with the European Union by pushing the deadline to July 9, easing immediate fears of tariffs on the bloc's goods. The move slightly boosted investor sentiment, as the proposed tariffs could have negatively impacted global fuel demand.
Oil prices had firmed to some extent last week, due to slower progress in the U.S.-Iran talks and a decline in active U.S. drilling rigs that suggested lagging supply ahead. But now the potential for new output from OPEC+ and political instability are limiting the increase.
