Brent crude futures have rebounded to nearly US$70 per barrel after initially trading in the US$65–67 range, demonstrating resilience in the face of OPEC+’s weekend announcement of a larger-than-expected production increase and ongoing tariff uncertainty from the United States.
The market’s muted reaction to these developments highlights both the complexity and the underlying strength of current oil demand.
OPEC+ announced a 548,000 barrels per day (bpd) output hike for August, a 33 per cent jump above market expectations and a clear acceleration from the steady 411,000 bpd increases since May.
While the news initially triggered a sharp 4.5 per cent drop in Brent prices — from US$68.30 per barrel on July 4 to US$65.20 by the afternoon of July 7 — the overall correction was short-lived, with prices quickly recovering as traders digested the broader supply-demand outlook.
The market’s resilience has been further supported by the postponement of US tariff announcements from July 9 to August 1, providing additional breathing room for prices to stabilise.
The delay in tariff enforcement has allowed both markets and nations time to adjust and negotiate, even as the prospect of new US tariffs on BRICS countries adds a layer of volatility.
Rystad Energy’s Chief Oil Analyst, Mukesh Sahdev, offered the following assessment: “OPEC+ appears to be pursuing multiple objectives with its latest move.
“In our view, the primary goal remains maintaining a backwardated crude market structure, which is evident in the strength of near-term time spreads.
“While concerns over rising supply have flattened the curve beyond the summer, prompt prices continue to find support from an expected demand peak in August 2025.
According to Mukesh Sahdev, OPEC+’s decision to raise production targets is partly aimed at easing market worries about non-compliance and excess supply.
However, Sahdev notes that the actual increase in oil reaching the market may be modest, as some members may not meet the new targets or could use the extra crude for domestic needs such as refining or power generation.
He also suggests that by boosting targets now, OPEC+ could be preparing for possible production cuts later this year if demand weakens between August and October.
Sahdev expects that, barring any major changes in supply, the oil market will likely remain backwardated, with prices hovering around US$65 per barrel.
The latest OPEC+ move pulls forward volumes from the May 2026 production target, aligning with seasonal refinery runs, increased crude burn in the Middle East, and rising demand from Asia, particularly China and India.
Despite the headline increase, prompt Brent backwardation remains intact, signalling that the market continues to price in tightness ahead of the anticipated peak in crude demand this August.
Looking ahead, analysts warn that as demand fades into October and non-OPEC+ supply is forecast to grow by 1.4 million bpd in 2025, Brent prices could drift toward the US$60 per barrel range.
However, several factors could help prevent prices from falling below this threshold:
- OPEC+ may not fully deliver on the increased target volumes
- Production from non-core OPEC+ members is expected to decline toward year-end
- Middle Eastern refiners are likely to divert more supply to domestic refining, exporting refined products rather than crude due to healthy margins
The market narrative is expected to shift from concerns over member disunity and non-compliance toward greater cohesion and compensatory cuts.
Additional sanctions on Russia, Iran, or Venezuela could add a geopolitical premium, while any move toward contango would likely prompt OPEC+ to announce fresh cuts.
By raising targets now, OPEC+ may be creating room for future reductions, especially during the seasonally weak refinery demand period between September and November.
The evolving US tariff landscape remains a critical factor, with the next key date set for August 1. The delay in tariff enforcement is giving oil markets time to digest policy changes and for nations to potentially renegotiate trade terms.
As of July 11, 2025, Brent crude is trading near US$70 per barrel, with the market balancing the impact of supply increases, robust summer demand, and the looming uncertainty of global trade policy.
