Oil prices fell in Asian trade on Monday as waning geopolitical tensions between Israel and Iran saw traders further pare back a risk premium, while anticipation of more output hikes by the OPEC+ also weighed.

Brent oil futures for August fell 0.8% to $67.20 a barrel, while West Texas Intermediate crude futures fell 1.1% to $64.77 a barrel by 21:44 ET (01:44 GMT).

Oil was still headed to rise more than 5% this month, having initially rallied on the Israel-Iran war.

Crude markets took middling cues from mixed purchasing managers index data from top oil importer China, which showed manufacturing activity contracted in June.

Israel-Iran ceasefire holds, supply risks ease

Crude was nursing sharp losses over the past week as an Israel-Iran ceasefire appeared to be holding, diminishing the prospect of supply disruptions in the Middle East.

The 12-day conflict had initially sent oil prices surging close to annual highs, especially after Israel and later the U.S. attacked Iran's nuclear facilities.

But the U.S. then brokered a ceasefire between the two countries, while President Donald Trump also claimed that more nuclear talks with Iran were on tap.

The ceasefire, which now appeared to be holding for nearly a week, greatly diminished fears that a protracted conflict in the Middle East will disrupt oil supplies from the region.

Concerns over Iran blocking the Strait of Hormuz, a key oil shipping route, were also quelled by the ceasefire.

OPEC+ output hike in focus ahead of July meeting

Oil was also pressured by concerns over more production increases by the Organization of Petroleum Exporting Countries and allies (OPEC+). The cartel is set to meet on July 6.

Reuters reported that the group will decide to increase production by 411,000 barrels per day in August, a similar margin as hikes seen in May, June, and July.

The cartel had begun scaling back two years of production cuts earlier this year, in part to offset the economic impact of persistently low oil prices, and in part to punish overproducers within its ranks.

Beyond the OPEC+, focus is also on U.S. fuel demand as travel activity increases with the summer season.

Source: Reuters