Global oil markets gained fresh momentum this week as geopolitical flashpoints and steady supply decisions combined to push prices higher. From the war-torn east of Europe to fire-ravaged Canada, a confluence of events is constricting the world's crude supplies, with traders braced for more volatility.
Brent crude futures rose 0.9% to $65.21 a barrel, while U.S. West Texas Intermediate crude increased 1.1% to $63.19. The gains followed OPEC+'s decision to maintain its 411,000 barrels per day production increase for July, continuing the same hike from the previous two months. Market analysts had expected a larger increase, which could have added more pressure on already falling prices, but the steady rise helped calm investors.
The global oil market remains tight, and geopolitical factors further complicate the supply outlook. Over the weekend, Ukraine intensified drone strikes that it carried out against Russia, causing damage to critical infrastructure and taking down an estimated 10% of the country's refining capacity, according to Russia's government. The news added a risk premium to oil prices, as traders watch the conflict and how it affects Russian exports.
Meanwhile, Iran is poised to reject a proposed nuclear pact with the United States. The proposal, which sought to roll back long sanctions for an end to uranium enrichment, has been rejected in Tehran for not meeting its core demands. A collapse of the talks would probably bar the return of Iranian oil to the global market, deny supplies, and prop up prices.
In North America, a series of wildfires in Canada's Alberta province have also interrupted about 350,000 barrels a day of oil sands production, representing around 7 percent of the country's overall crude output. Another supply disruption has driven bullish sentiment in the market as traders weigh the possibility of longer-term output cuts from environmental damage.
There was further good news for oil prices as the U.S. dollar weakened even more. When the dollar falls, oil prices often rise because dollar-priced commodities become cheaper for holders of other currencies. Investors are also closely watching for a possible drop in U.S. crude stockpiles, which could increase concerns about supply.
Crude was already up almost 3% last week after OPEC+ made its announcement. This rise followed weeks of price declines caused by mixed demand signals and economic uncertainty. Now, with OPEC+ firm on its production schedule and several disruptions tightening supply, the market appears to be stabilizing.
Further developments in Ukraine, the situation with Iran, and weather conditions in North America are likely to play a key role in shaping the oil market over the next few days.
