ISLAMABAD (PEN) : Oil prices surged more than \$1 per barrel on Monday following OPEC+’s decision to keep its July oil output hike consistent with the increases implemented in June and May. The move surprised traders who had anticipated a larger boost in production.
By 0346 GMT, Brent crude futures climbed \$1.34, or 2.13%, reaching \$64.12 per barrel, rebounding from a 0.9% decline on Friday. Meanwhile, U.S. West Texas Intermediate (WTI) crude rose \$1.52, or 2.5%, to \$62.31 per barrel after a slight 0.3% drop in the previous session.
OPEC+ Production Strategy and Market Response
On Saturday, OPEC and allied producers collectively agreed to raise output by 411,000 barrels per day (bpd) in July. This marks the third consecutive month with the same production increase, aimed at regaining market share and addressing compliance issues among member countries.
Industry analyst Harry Tchilinguirian of Onyx Capital Group commented on LinkedIn:
“Had they gone through with a surprise larger amount, then Monday’s price open would have been pretty ugly indeed.”
Market participants noted that the 411,000-bpd increment was largely anticipated and already factored into current Brent and WTI futures prices.
The Commonwealth Bank of Australia highlighted the strategy’s underlying motive:
“The headline motive has centred on punishing OPEC+ members like Iraq and Kazakhstan that have persistently produced above their pledged quotas.”
In line with this, Kazakhstan has communicated to OPEC its intention not to reduce production, according to a report by Russia’s Interfax news agency citing Kazakhstan’s deputy energy minister.
Outlook and External Factors
Goldman Sachs analysts forecast that OPEC+ will likely proceed with a similar 410,000 bpd increase in August. The bank explained in a recent note:
“Relatively tight spot oil fundamentals, beats in hard global activity data, and seasonal summer support to oil demand suggest that the expected demand slowdown is unlikely to be sharp enough to stop raising production when deciding on August production levels on July 6th.”
Additional factors influencing oil market dynamics include low U.S. fuel inventories, which have heightened supply concerns ahead of a potentially active hurricane season. ANZ analysts observed:
“More encouraging was a huge spike in gasoline implied demand going into what’s considered the start of the U.S. driving season.” They noted the nearly 1 million bpd increase as the third-highest weekly jump in the past three years.
U.S. crude production, which hit an all-time high of 13.49 million bpd in March, is also under close scrutiny. Recently, Baker Hughes reported a decline in active U.S. oil rigs for the fifth consecutive week, down four to 461 — the lowest tally since November 2021.
