Oil prices climbed nearly 3 per cent on Monday despite the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) sticking with output hike plans.
Support, however, came as wildfires burning in Canada’s oil-producing province threatened supply and President Donald Trump’s new tariff threats weighed on the US Dollar.
These developments led Brent crude to trade higher by $1.85 or 2.95 per cent to $64.63 a barrel, with the US West Texas Intermediate crude gaining $1.73 or 2.85 per cent to close at $62.52 per barrel.
Over the weekend, OPEC+ moved ahead with another big increase of 411,000 barrels per day for July as it looks to wrestle back market share and punish over-producers.
Having spent years curbing production more than 5 million barrels a day or 5 per cent of world demand eight OPEC+ countries made an modest output increase in April before tripling it for May, June and now July.
In a statement, OPEC+ cited a steady global economic outlook and current healthy market fundamentals, as reflected in the low oil inventories as its reasoning for the July increase.
Goldman Sachs analysts expect OPEC+ to implement a final 410,000 barrels per day production increase in August while those at Morgan Stanley say they expect 411,000 barrels per day to be added back each month up to a total of 2.2 million barrels per day by October.
While the supply news would normally affect the market, wildfires burning in Canada’s oil-producing province of Alberta have affected about 7 per cent of the country’s overall crude oil output.
Also supporting prices, the US Dollar slipped across the board on Monday on worries that Trump’s fresh tariff threats might hurt growth and stoke inflation.
A weaker US currency makes Dollar-priced commodities like oil less expensive for buyers using other currencies.
Prices were also supported by the increased geopolitical risk premium after Ukrainian drone strikes against Russia over the weekend.
Also, mixed signals from Iran-US talks kept market participants on edge with an Iranian diplomat saying Iran was poised to reject a US proposal to end a decades-old nuclear dispute on Monday.
Delegations from the two countries made some progress after a fifth round of talks in Rome last month.