Oil Prices Rising despite OPEC+ Increasing Production

Brent crude prices are rising by 2.3% to $70.90 per barrel this week, recovering after an early-week dip. On Monday, prices fell by 1.3% to $68.04 following an unexpected decision from OPEC+, which announced a substantial increase in oil production by 548,000 barrels per day starting in August. This follows a previous gradual ramp-up of 411,000 bpd that began in May. The August increase is the largest so far and nearly completes the reversal of OPEC+’s prior 2.2 million bpd output cuts, leaving only 419,000 bpd to be restored by September. Market expectations suggest that the remaining cut may also be lifted during the August meeting.

This bold move indicates that OPEC+ members are confident oil prices will continue rising. UAE Energy Minister Suhail al-Mazrouei reinforced this view, stating that the absence of inventory build-up despite recent supply increases signals robust demand. "You can see that even with the increases for several months, we haven’t seen a major build-up in inventories, which means the market needed those barrels," he said on Wednesday. The UAE could be in line for a production quota hike in August.

Oil prices were also boosted by the delay in U.S. trade war escalation. President Donald Trump postponed the deadline for tariff hikes to August 1, which helped Brent crude jump to $71.35 by Tuesday. While U.S. crude inventories rose by 7.07 million barrels last week, well above the expected 1.70 million barrel draw. This data point appears to contradict al-Mazrouei’s remarks. However, a single week's figure doesn't necessarily reflect broader trends - just four weeks ago inventories dropped by 11.47 million barrels.

Geopolitical risks are adding a layer of uncertainty, but not panic. A proposed U.S. bill threatens 500% tariffs on countries purchasing Russian oil. However, the legislation is seen as more symbolic than actionable for now. U.S. president Donald Trump is unlikely to endorse such measures if he has a full control of it. Even a temporary disruption of Russian exports could push Brent prices toward $77.00–$79.00, with a breakout above that range potentially driving prices beyond $100.00, which would have clear inflationary consequences.

Despite this backdrop, large investors are not yet betting on a strong oil rally. Last week, $111.35 million worth of shares in the United States Oil Fund (USO) were sold, followed by another $46.0 million this week. These flows suggest skepticism about a sustained recovery from the $67.00–$69.00 level up to $77.00–$79.00.

Technically, the outlook for oil remains positive. Prices failed to break below the key support zone of $67.00–$69.00 and rebounded, making a deeper drop toward $57.00–$59.00 less likely. Momentum is now tilted toward a test of the $77.00–$79.00 range.