After initially trading in the $65-67 range, Brent futures have rebounded to near the $70 per barrel mark, shrugging off OPEC+’s weekend output hike announcement, which caused only minor market corrections.
The postponement of US tariff announcements from July 9 to August 1 has also helped support prices.
Here is Rystad Energy’s oil market update from Chief Oil Analyst, Mukesh Sahdev:
“OPEC+ appears to be pursuing multiple objectives with its latest move.
In our view, the primary goal remains maintaining a backwardated crude market structure, which is evident in the strength of near-term time spreads.
While concerns over rising supply have flattened the curve beyond the summer, prompt prices continue to find support from an expected demand peak in August 2025.
By raising production targets, OPEC+ is also addressing bearish concerns related to non-compliance and overproduction.
In practice, actual supply reaching the market may still be limited, either because production falls short of targets or because part of the increase is used for domestic refining and crude burn.
It is also possible that OPEC+ is setting the stage for future target cuts by raising them now, especially if demand declines significantly between August and October.
Unless there is a major shift on the supply side, we expect the crude market to remain backwardated and prices to stay near the $65 per barrel range.”
The 548,000 barrels per day production increase announced by OPEC+ for August marks a clear shift from the steady 411,000 barrels per day hikes since May, representing a 33% jump above market expectations.
While this initially triggered a 4.5% drop in Brent prices, falling from $68.30 per barrel on July 4 to $65.20 by the afternoon of July 7, the overall market reaction was muted.
This move pulls forward volumes from the May 2026 production target and aligns with seasonal refinery runs, higher crude burn in the Middle East and rising demand from Asia, particularly China and India.
Despite the headline increase, prompt Brent backwardation remains intact.
This signals that the market continues to price in tightness ahead of peak crude demand in August.
Looking ahead to October, as crude demand fades and non-OPEC+ supply forecast to grow by 1.4 million barrels per day in 2025—starts to weigh on market balances, Brent could drift toward the $60 per barrel range.
However, several factors could help prevent prices from falling below the $60 per barrel mark.
OPEC+ may not fully deliver on the increased target volumes, which could be supportive, while production from non-core OPEC+ members is expected to decline toward year-end.
Middle Eastern refiners are likely to divert part of the additional supply to domestic refining, exporting more refined products rather than crude due to healthy margins.
The market narrative is expected to shift from concerns over member disunity and non-compliance toward greater cohesion and compensatory cuts.
Further sanctions on Russia, Iran or Venezuela could add a geopolitical premium.
Finally, if the market begins to flirt with contango, OPEC+ will likely announce fresh cuts.
By raising targets now, the group is possibly creating room to reduce production later; without this increase, it would have been challenging to justify cuts during the seasonally weak refinery demand period between September and November.
Much depends on how the US tariff discussions evolve in the coming days, with August 1 fast approaching.
The shifting timelines for full tariff enforcement suggest that the US is being cautious with its economic measures.
Whatever the intent, the delay is giving oil markets time to digest and adjust these tariff-related announcements.
More importantly, it gives nations time to negotiate with the US, and vice versa, as trade lines are redrawn and agreements reassessed.
The latest US talk of additional tariffs on the BRICS nations is adding to market volatility.
However, the BRICS group is too well connected to be easily disrupted.
They could choose to bypass these measures through alternative payment systems or other tools.
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