Brent finds support at $71/bbl; OPEC+ raise quotas

OPEC+ agreed to raise August oil production quotas by 0.188 mb/d, following similar increases in June and July, as oil exports through the Strait of Hormuz gradually recover and oil prices return to pre-war levels. Despite nearly 0.8 mb/d of quota increases since April, actual production remained well below target because the recent US-Israeli war on Iran disrupted tanker traffic, with OPEC+ output falling from 42.77 mb/d in February to 33.13 mb/d in May before beginning to recover in June. The seven core OPEC+ producers have nearly completed reversing their 1.65 mb/d production cuts. After the August increase, only 0.379 mb/d remains to be restored, with a full rollback expected if another similar increase is approved in September. Ukraine struck a major oil terminal in Saint Petersburg, saying it was a key source of revenue for Russia's war effort, while Russia said it intercepted 72 drones and reported no casualties. Ukraine says its recent long-range strikes have disabled nearly 43% of Russia's oil refining capacity, contributing to fuel shortages, though this figure has not been independently verified. Ukraine also denied Russian claims that Kostyantynivka had fallen, saying the town remains under its control. 12 Japan-linked tankers, including at least 6 carrying crude to East Asia, transited the Strait of Hormuz on Monday after being stranded since the conflict began. India's crude oil inventories rose to 104 million barrels by end-June, near pre-war levels, as record imports of 5.0 mb/d—including 2.6 mb/d from Russia—and increased purchases from Venezuela helped rebuild stocks and reduce reliance on Hormuz. Finally, the Sep/Oct’26 and Sep/Mar’27 Brent futures spreads are at -$0.20/bbl and $0.13/bbl respectively.

Quiet morning in Dated although we drifted higher on limited volume. Bal-Jul/Aug DFL roll traded -$0.75/bbl, with balmo Jul DFL trading at -$1.10/bbl. We saw Aug DFL buying up to -$0.36/bbl and Sep DFL up to -$0.31/bbl. We saw buying of 29-4 cal Aug, which got hit fairly low at -$0.46/bbl, and buying of 6-9 vs 13-16 Jul in the front at -$0.30/bbl.

A quiet morning in Brent/Dubai as we traded range-bound in Aug between $5/bbl and $5.45/bbl. There was selling of bal Jul Brent/Dubai around $5.6/bbl and selling of Nov ICE vs full Jul Dub at $6.97/bbl. There was continued smalls selling of Oct ICE vs Aug Dub by Chinese throughout the morning. The Dubai spreads traded slightly lower in an orderly fashion, down from -$1.15/bbl to -$1.28/bbl. The boxes were unchanged from Friday with no interest OTC. The Cal'27 continued to be well bid at $1.85/bbl, nothing trading.

Sing 0.5% opened weaker this morning relative to Friday night. The Sing crack traded down to $11.80/bbl from last weeks close of $12.40/bbl. We did see some recovery post window back up to $12.25/bbl to close the morning. Spreads weakened with the crack into the window with Aug/Sep Sing trading down to $11.75/mt before running into some buying. The Euro crack was implied a bit higher due to the front E/W being offered down, the Aug Euro crack closed the morning around $4.55/bbl. Aug/Sep Euro was implied around $10.25/mt without much trading.

380 E/W came under some pressure to start the morning, being implied down to $15.00/mt without anything trading on the front. The 380 cracks traded down to -$6.70/bbl on fairly thin liquidity while the barge crack remained fairly stable, trading between -$9.20/bbl and -$9.10/bbl throughout the morning. 380 spreads were weaker, with Aug/Sep seeing a fair amount of selling this morning, first getting lifted at $1.75/mt before selling down to $1.00/mt. Barge spreads were better supported due to crack strength relative to 380, with Aug/Sep barges up to $1.50/mt.

This morning in distillates, Sing gasoil spreads saw mixed interest overall, with Aug/Sep selling into the end window, trading from $3.25/bbl down to $3.10/bbl, while Sep/Oct saw buying at $3.60/bbl. E/W saw scale back buying, moving from -$53.00/mt down to -$54.75/mt last. Regrade was bid in August at -$1.90/bbl, while kero spreads were offered in the front, with Aug/Sep kero trading down to $1.90/bbl.

ICE gasoil spreads opened higher before weakening, with Sep/Dec trading from $89.50/mt down to $86.25/mt, while cracks sold off initially before rallying post window, with the September futures crack at $48.90/bbl last. Heating oil spreads weakened, while HOGOs were rangebound, with the Aug HOGO swap at 29.0c/gal.

This morning in gasoline, flat price traded end window at $91.55/bbl with MOC better offered. The east opened stronger before going better offered, with Aug cracks falling from $20/bbl to $19.50/bbl, and Q4 was offered down to $11/bbl. Spreads softened as well as Aug/Sep came off from $4.15/bbl to $3.70/bbl, and E/W got sold down to -$12.55/bbl. EBOB was supported, with Aug cracks seeing buyside interest up to $31.75/bbl, and Aug/Sep was bid at $50/mt.

This morning in Naphtha, relatively quiet morning with real interest in MOC buyside with market makers sell side of at flat. Europe crack sees better buying, trading up to -$3.30/bbl end of window with Q4 getting hit -$6.25/bbl. E/W weakening off from $40.50/mt to $39/mt with Aug/Sep E/W box coming off from $1.50/mt to lows of $0.50/mt but rebounds slightly end of window. Outright buyside interest in Q4/Q1 MOPJ flat price spread from bank with buying in Oct/Nov at $8/mt.

This morning in NGLs, there was some early Aug flat price interest in CP and FEI, trading at $522/mt and $577/mt respectively. Had buyside interest in Cal'27 with the CP/MOPJ trading at -$102/mt, FEI/CP at $35/mt, and the LST/FEI at -$162/mt. Across the morning CP found some strength due to spread buying, with Aug/Sep trading up to $31/mt, having opened the day printing at $21/mt, and Sep/Oct traded at -$3/mt, having closed last week at -$6/mt. Having begun the day stronger, FEI spreads softened into window, seeing Aug/Sep trade up to $11/mt, before trading $9/mt end window, and Sep/Oct printing at $1/mt end window, having traded at $2.50/mt earlier in the morning. End window on screen, Aug FEI flat price was hit at $576/mt.

* AI CapEx from Alphabet, Amazon, Meta, Microsoft, and Oracle is set to hit ~2.5% of US GDP in 2026 (up from 1.5% in 2025), nearing defense spending (~2.7%). By 2027, it's projected to reach ~3.2% of GDP - surpassing defense spending for the first time ever. Combined CapEx: $800B in 2026, rising to $1.1T in 2027.

* Central banks now hold ~25% of reserves in gold, up from a 10% low (2015–2020). Still well below historical norms - 40–60% (1970–90), ~80% before that, and near 100% under the gold standard. With rising debt, currency debasement, and de-dollarization trends, 25% looks low by comparison.

* No European EV model made the global top 20 sales list.

* BofA Bull/Bear Indicator hit 9.5 - a contrarian sell signal (1–3 month horizon), flagging short-term equity risk despite strong flows.

* US construction hiring rate fell to 3.5% in May (-0.3pp), the lowest since records began in 2000.

This Week's Calendar
• Mon: June Services PMI
• Tue: ADP Employment
• Wed: Fed Minutes
• Thu: Jobless Claims, June Existing Home Sales, Cad employment
• Fri: IEA Monthly Report
• Earnings season starts next week