How Did Oil Prices Rise Despite OPEC+’s Production Hike?

Oil prices closed higher on Monday, the first trading day of the week, despite OPEC+’s decision to increase production for the third consecutive time since abandoning its long-standing voluntary output cuts aimed at bolstering global oil prices. This shift in production policy reflects OPEC+’s focus on maintaining its share of the global oil market and preventing competitors, particularly US producers, from capitalizing on potential supply gaps.

Factors Supporting Oil Price Resilience:
Several factors contributed to the stability of global oil prices despite the production hike:

Lower-Than-Expected Production Increase: OPEC+’s decision to raise output by 411,000 barrels per day (bpd) starting July 2025 was below market expectations. This mitigated the initial market shock, which had caused a 0.3% price drop on the previous Friday.
Geopolitical Tensions: Escalating conflicts in Eastern Europe, particularly Ukraine’s drone attacks on the Russian cities of Kursk and Voronezh, disrupted infrastructure and raised concerns about supply stability. Russian authorities reported that air defenses downed 162 Ukrainian drones, including 57 used in the attacks on these border cities, ahead of a new round of peace talks between Moscow and Kyiv aimed at resolving the conflict that began with Russia’s invasion of Ukraine in February 2022.
Wildfires in Canada: Forest fires in Alberta, a key oil-producing region, led to the precautionary closure of a major oil production site and the evacuation of workers, fueling fears of supply disruptions.
US Dollar Weakness: The US dollar fell to 98.71 on the Dollar Index, down from a previous close of 99.33, driven by renewed US-China trade tensions. This decline supported oil prices, which typically move inversely to the dollar’s value.
OPEC+ Production Policy:
At its May 30 meeting, OPEC+ agreed to increase production by 411,000 bpd starting July 2025, marking the third consecutive output hike. Since April, the group has raised production by a total of 1.37 million bpd, representing about 62% of its target of 2.2 million bpd to restore output levels to those before the voluntary cuts. This strategic shift aims to balance supply and demand while safeguarding OPEC+’s market share against rising US production.

Oil Demand Outlook:
According to a Reuters survey, global oil demand is expected to rise by an average of 775,000 bpd in 2025. The International Energy Agency’s latest outlook projects a slightly lower increase of 740,000 bpd.

Market Developments:

US crude oil futures rose to $62.98 per barrel, up from the previous close of $60.68. The day’s trading saw a low of $61.55 and a high of $63.84.
The US dollar’s decline was exacerbated by comments from US Treasury Secretary Scott Bessent, who noted that US-Chinese trade talks had “stalled somewhat” and required a call between the US and Chinese presidents to move forward.
These combined factors—geopolitical unrest, supply disruptions, a weaker dollar, and a conservative OPEC+ production increase—enabled oil prices to climb despite the group’s decision to boost output