The oil market improved by 1 per cent on Monday as signs of strong demand outweighed the impact of the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) hiking output more than expected for August, as well as concern about the potential impact of US tariffs.
Brent crude futures gained 91 cents or 1.3 per cent to close at $69.20 per barrel and the US West Texas Intermediate (WTI) crude futures appreciated by 57 cents or 0.8 per cent to $67.57 a barrel.
Stronger demand was estimated to have remained above expectations as well after a record number of Americans travelled for the Fourth of July holiday by road and air.
OPEC+ agreed on Saturday to raise production by 548,000 barrels per day in August, more than the 411,000 barrels per day hikes carried out in the earlier three months.
The decision of the group will bring nearly 80 per cent of the 2.2 million barrels per day voluntary cuts from eight members back into the market.
The latest hike sends a clear message that the cartel is firmly shifting toward a market share strategy. It was also a response to Kazakhstan and Iraq, which are still overproducing their higher quotas.
Market analysts noted that these overproducers are unlikely to significantly raise their output compared with the recent heights reached during the first quarter.
Also, by approving another output hike, heavyweight OPEC+ leader, Saudi Arabia might seek to up pressure on members for not keeping to agreed quotas by slashing expected oil profits due to lower prices.
Saudi Arabia also raised the August price for its flagship Arab Light crude to a four-month high for Asia.
Amid these development, Goldman analysts expect OPEC+ to announce a final 550,000 barrels per day increase for September at the next meeting on August 3.
Meanwhile, pressure came as US officials flagged a delay regarding when tariffs would begin, but failed to provide details on changes to the rates that will be imposed. Investors are worried that higher tariffs could slow economic activity and oil demand.
The Donald Trump-led administration will make several trade announcements in the next 48 hours.
According to the US Treasury Secretary, Mr Scott Bessent, there are offers from countries to clinch a tariff deal before the July 9 deadline.
On the geopolitical front, Yemen’s Iran-aligned Houthis said it sank a ship in the Red Sea on Monday ahead of Israel’s Prime Minister Benjamin Netanyahu plans to meet with President Trump.