Oil prices surged Monday after OPEC+ confirmed it would maintain a planned 411,000-barrels-per-day increase in July output, marking the third consecutive monthly rise and easing fears of a surprise supply glut. Brent crude gained $2.49, or 3.97%, to $65.27 per barrel, while U.S. West Texas Intermediate rose $2.70, or 4.44%, to $63.49.
The decision, announced Saturday, came amid internal divisions and rising geopolitical risks following weekend Ukrainian drone strikes on Russian military assets. Both Brent and WTI had declined more than 1% last week, and traders had anticipated the increase, which had been signaled in advance.
"Had they gone through with a surprise larger amount, then Monday's price open would have been pretty ugly indeed," said Harry Tchilinguirian, analyst at Onyx Capital Group.
The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, aims to recover market share while indirectly punishing members exceeding output quotas. Kazakhstan, which previously indicated it would not cut production, told OPEC that it has no intention of reducing output, according to Interfax, citing Deputy Energy Minister Askhat Khasenov.
Analysts at SEB estimated Kazakhstan would only be incentivized to scale back production if crude dropped below $58 per barrel. Meanwhile, Goldman Sachs projected a final 410,000 bpd increase in August and suggested that "relatively tight spot oil fundamentals, beats in hard global activity data and seasonal summer support to oil demand" justify continued hikes.
Morgan Stanley expects 411,000 bpd to be restored monthly through October, totaling 2.2 million bpd. "With this latest announcement, there is little sign that the pace of quota increases is slowing," the bank stated.
OPEC+'s strategy stands in contrast to traditional cartel behavior, with members continuing to boost output despite softening prices. The group appears motivated by a mix of factors: disciplining quota violators, clawing back share from U.S. shale, and aligning with U.S. President Donald Trump's push for lower prices.
Still, the move comes at a cost. Bahrain, Kuwait, and Saudi Arabia are expected to post deeper fiscal deficits this year. The International Monetary Fund says while some Gulf states remain in surplus, declining oil revenues could undermine public spending and slow investment in non-oil sectors.
Saudi Finance Minister Mohammed al-Jadaan told the Financial Times the kingdom will stay committed to spending plans, but "spend in support of the growth." He said that with deficits possibly rising to 5% of GDP, there's still a long runway before reaching the 40% debt-to-GDP ceiling.
