OPEC+: OPEC+ announced a significant production increase of 411,000 barrels per day for July, continuing its strategy of boosting output after years of deep cuts. This marks the third consecutive month of large hikes, aimed at regaining market share and disciplining members like Iraq and Kazakhstan for previous overproduction. Despite the risk of oversupply pressuring crude prices, leading members Saudi Arabia and Russia are prioritizing volume over price. The group held an online meeting Saturday, weighing other options but ultimately chose to press forward with their volume-driven strategy.
Asia's Sluggish Oil Demand: Despite a significant drop in global crude prices earlier this year, China and the broader Asian market have not shown a corresponding increase in oil demand. In fact, China’s crude imports fell in May, with seaborne arrivals dropping to 9.43 million bpd from over 10.4 million bpd in both March and April, despite previously stocking up on discounted Russian and Iranian barrels. The surplus of crude in China hit a recent high in April, indicating weak refinery throughput relative to supply. Regionally, Asia’s seaborne imports for the first five months of 2025 are down 320,000 bpd compared to the same period last year, signaling that softer economic conditions and strategic stockpiling maybe capping demand growth, even with lower prices.
Rig Count: U.S. energy firms cut oil and gas rigs for a fifth straight week, bringing the total to 563, the lowest since November 2021. The drop reflects a broader trend of reduced capital spending amid lower energy prices, with oil rigs falling to 461 and Permian Basin activity hitting a multi-year low. Despite fewer rigs, the EIA still projects record-high crude and gas output in 2025, driven in part by expected rebounds in gas prices. Energy companies continue to prioritize shareholder returns over production growth, especially after sharp capex increases in prior years.
Market Overview: Prices are up nearly 4% early Monday after OPEC+ kept its July output increase steady at 411,000 bpd, in line with expectations from their meeting on Saturday. The restrained move eased market fears of a larger supply hike, helping prices recover from last week’s 1% decline. Traders had largely priced in the decision, and analysts now expect the group to continue monthly increases through October. Despite rising production, summer demand and tight spot market fundamentals are helping support prices.
OPEC Production Increases Month over Month
OPEC+ reaffirmed its strategy to unwind voluntary production cuts by approving another 410,000 barrels per day increase for July, citing strong market fundamentals and seasonally higher summer demand. As shown in the chart, this marks the third consecutive 400,000+ bpd hike since May, pushing the group’s total announced additions to 1.37 million bpd, 62% of the 2.2 million bpd they plan to return to the market. Despite rising supply weighing on crude prices, OPEC+ sees the market as tight enough to absorb the extra barrels, especially as some member countries continue to overproduce. Analysts note the move intensifies pressure on rivals like U.S. shale producers, while even within OPEC+, some nations such as Algeria voiced hesitation over continued increases.
Oil prices rose over 2% on Monday, with WTI closing at $62.52 per barrel, as supply concerns from wildfires in Alberta overshadowed OPEC+ plans to raise output by 411,000 bpd in July. The fires have disrupted roughly 7% of Canada’s crude production, prompting shutdowns and evacuations near Fort McMurray. A weaker U.S. dollar, driven by renewed tariff threats from President Trump, added support by making oil more attractive to foreign buyers. Prices were also buoyed by heightened geopolitical tensions following Ukrainian drone strikes on Russia, reinforcing the market's risk premium. While OPEC+ confirmed its third straight monthly hike to reclaim market share and penalize overproducers, traders noted the 411,000 bpd increase had already been priced in, helping prevent a bearish reaction. Some insiders suggested the group may even consider a larger increase, though a surprise hike could have significantly pressured prices.
