Despite preparations to boost the flow of crude oil to global markets next month, oil prices surged to their highest levels in two weeks on Tuesday.
Over the weekend, the Organization of the Petroleum Exporting Countries and its allies, or OPEC+, a powerful group of oil producers, decided to boost crude production by 548,000 barrels per day in August.
However, the decision to release additional barrels into the open market has triggered a new war for global market dominance rather than prices declining ahead of that increased supply.
“Their surprise superhike…isn’t just a number, it’s a declaration – a shot across the bow,” writing in a note on Tuesday, SPI Asset Management managing partner Stephen Innes said. “OPEC+ has dropped the scalpel and picked up the trident,” he stated. it’s “no longer delicately managing prices, but jabbing at market share with force.”
In order to bring the 2.2 million barrels per day of voluntary production cuts from the previous year back to the market, OPEC+ has been progressively increasing production. The August number was higher than the May, June, and July rises of 411,000 barrels per day.
It was anticipated that the group would completely reverse its voluntary reduction by September, possibly a year faster than anticipated. “A rollback delivered with the urgency of a sidewinder strike,” as Innes described the abrupt change, is a reference to a special baseball pitch that can have a misleading release point.
“Behind the curtain, this is not just a pump fest – it’s a punishment regime,” Innes stated.
No ‘drill-baby-drill’
President Trump asked “everyone” to keep oil prices low after hitting Iran’s nuclear installations in June, out of concern that rising energy costs may provoke a public reaction.
Trump promised to “drill, baby, drill” domestically and ran on a platform of lowering energy costs. According to a Wall Street Journal story, the White House has also been opposing the Biden administration’s green energy initiatives and has taken that fight to trade talks with the European Union.
Strong summer demand during the driving season, continued worries over Iran, one of the world’s biggest oil producers, and a widening divide within OPEC+ over quota compliance have all contributed to the recent drama in the oil market.
Russian and Iraqi oil producers that exceeded their quotas are now “relegated to the penalty box, with reduced slices of the next [production] hike,” while OPEC+ producers who are meeting their output targets are “getting the spoils,” according to Innes.
The producers’ alliance appears to be trying to limit shale production in the United States at the same time.
Oil production rigs in the United States continue to operate at $60 per barrel for West Texas Intermediate crude. However, Innes stated that the “fields go quiet” at $50 per barrel. By pushing the marginal producer back to the margins, OPEC+ has been wagering that a price war “waged with barrels instead of rhetoric” may recover market share.
The Energy Information Administration said in a monthly report issued Tuesday that U.S. producers have slowed their drilling activity as a result of declining oil prices.
From an all-time high of slightly over 13.4 million barrels per day in the second quarter of 2025, the agency reduced its prediction for crude-oil output to less than 13.3 million barrels per day by the fourth quarter of 2026.
According to Fawad Razaqzada, market analyst at City Index and FOREX.com, the United States hasn’t been able to significantly boost production in recent months. He cited the most recent data from Baker Hughes (BKR), which shows that the number of active oil rigs in the United States has dropped to 425, the lowest since October 2021, from roughly 780 rigs at the peak of 2022.
With the U.S. drilling not “drill-baby-drilling,” this could be the ideal time for OPEC+ to increase output as much as feasible. FOREX.com, City Index, and Fawad Razaqzada
“It can be argued, therefore, that this might be the perfect opportunity for the OPEC+ to raise output as much as possible, while the U.S. drilling is not ‘drill-baby-drill’-ing,” Razaqzada stated.
Indeed, the American shale boom helped the United States overcome its reliance on Middle Eastern oil, which was followed by last month’s historic U.S. military attacks in Iran. In 2020, the United States turned becoming a net exporter of oil.
However, geopolitics still has a significant impact on the oil market.
“June’s 12-day war between Israel and Iran lit a fuse under oil, sending Brent soaring more than 30% in three weeks, only to collapse like a soufflé under a Pentagon airstrike and a sudden cease-fire,” Innes stated. “Premium risk? In. premium for risk? Out. Do it again.
The global oil market is also influenced by other factors, such as the potential effects of Trump’s tariff battle on inflation and global economies.
According to Razaqzada, the outlook for oil demand has brightened, and trade and inflation concerns have subsided since April, supporting crude prices.
There were concerns that trade issues would negatively impact the world economy and reduce demand for oil, but he noted that these concerns have “receded sharply,” with the Nasdaq Composite Index COMP and the S&P 500 index SPX rising from their April lows to recent record highs.
According to Razaqzada, the GOP also enacted a significant budget and tax package. He added that higher tariffs and the rate cuts by some central banks had prevented inflation from increasing as anticipated. This “should boost economic output in the short-term all else being equal, even if it ultimately adds trillions to the national debt.”
Although it has been rising recently, the U.S. benchmark crude WTI has lost 4.7% so far this year.
On Tuesday, the U.S. benchmark West Texas Intermediate crude for August delivery (CL.1) (CLQ25) increased 0.6% to $68.33 a barrel on the New York Mercantile Exchange, while the global benchmark Brent saw its September contract (BRN00) (BRNU25) tack on 0.8% to $70.15 a barrel on ICE Futures Europe. Dow Jones Market Data reported that both were the highest settlements since June 23.
