Oil prices edged higher Monday even after OPEC+ announced a larger-than-expected supply boost for August, with the physical market's tightness providing a cushion against the potentially bearish impact. Brent crude rose 1.1% to $69.05 per barrel by 10:20 a.m. ET, recovering from an earlier low of $67.22. U.S. West Texas Intermediate (WTI) crude climbed 0.78% to $67.52 after briefly falling to $65.40.
OPEC and its allies, collectively known as OPEC+, agreed over the weekend to increase output by 548,000 barrels per day (bpd) in August, exceeding the 411,000 bpd monthly hikes seen from May through July. The move marks a sharper pivot away from the cartel's cautious production policy since 2023 and comes as global demand recovers from a post-pandemic slump.
"For now, the oil market remains tight, suggesting it can absorb additional barrels," said Giovanni Staunovo, analyst at UBS.
Saudi Arabia, the group's de facto leader, signaled confidence in demand by raising the price of its flagship Arab Light crude to Asia to a four-month high for August, according to state pricing notifications. Analysts see this as a bullish indicator, particularly during peak summer demand.
"The decision to raise prices during the peak summer demand season signals that physical markets remain tight," said Ole Hansen, head of commodity strategy at Saxo Bank A/S. "In the short term, downside risks to crude appear contained."
According to RBC Capital Markets, the latest production hike will return nearly 80% of the 2.2 million bpd voluntary cuts implemented by eight OPEC producers last year. However, RBC noted that actual increases have trailed official targets, with Saudi Arabia contributing the bulk of additional barrels.
Goldman Sachs expects OPEC+ to finalize another 550,000 bpd increase for September at its next meeting on August 3, completing the group's rollback of the 2023 cuts.
Still, concerns over U.S. trade policy weighed on sentiment. Washington officials signaled that new tariffs may be delayed beyond the previously indicated start date but offered no clarity on revised rates. Market participants fear that escalating trade tensions under President Trump's administration could hinder global economic activity and dampen oil demand.
"Concerns over Trump's tariffs continue to be the broad theme in the second half of 2025, with dollar weakness the only support for oil for now," said Priyanka Sachdeva, senior market analyst at Phillip Nova.
OPEC+ stated that the supply boost reflects "a steady global economic outlook and current healthy market fundamentals." However, analysts warn that post-summer seasonal demand weakness and geopolitical uncertainties could pressure prices in the coming months.
