Oil prices jump on Ukraine drone strikes as OPEC pumps up production

Global oil prices rose by around 3% over the weekend despite OPEC+ maintaining production increases for July at 411,000 barrels per day (bpd), the same level as it had set for the previous two months.

Analysts pointed to the impact of Ukraine’s drone strike on Russian airfields and ongoing concerns over US tariff implementations as the main reasons for the price jump.

OPEC+ members agreed after a virtual discussion that, with a steady global economic outlook and healthy market fundamentals currently in place, they would move forward with a gradual return to long-term production of 2.2 million bpd.

Ongoing market stability

OPEC noted that it might pause or reverse the scheduled production increases depending on evolving market conditions.

The eight OPEC+ countries believe this flexible approach will allow them to continue supporting oil market stability.

The member countries will meet again on 6 July 2025 to decide upon the production levels for August.

Accelerated compensation

The group also noted that this measure would provide an opportunity for participating countries to accelerate their compensation for previous overproduction.

The eight members reiterated their collective commitment to full conformity with the original Declaration of Cooperation and their intention to fully compensate for any overproduced volume since January 2024.

This includes the additional voluntary production adjustments agreed upon at the April 2024 OPEC+ meeting.

Seasonal demand

S&P Global believes that seasonal northern summer energy demand will obscure any impact the OPEC+ production increases might have in the near term.

However the research firm also believes supply growth will eventually outweigh demand growth.

“If this happens and there is no subsequent output cut, we project dated Brent prices will fall to US$50 (A$77) per barrel or less by year-end,” S&P Global Commodity Insights said.