Oil Prices Climb Amid Supply Disruptions and Geopolitical Uncertainty
Oil prices rose for a second consecutive session on Tuesday, supported by a combination of global supply concerns and ongoing geopolitical tensions.
Key factors include wildfires in Canada affecting production, Iran’s expected rejection of a US nuclear proposal, and continued uncertainty surrounding the Russia-Ukraine conflict.
As of early Tuesday in Asia, Brent crude futures gained 55 cents, or 0.85%, reaching $65.18 a barrel. US West Texas Intermediate (WTI) crude rose 59 cents, or 0.94%, to $63.11 per barrel. Both benchmarks had surged nearly 3% in the previous session, following a closely watched OPEC+ decision.
The rise in prices comes despite the Organization of the Petroleum Exporting Countries and its allies (OPEC+) agreeing to maintain their planned output increase of 411,000 barrels per day for July — a continuation of production levels set over the past two months. The move reassured markets that no unexpectedly large increase would occur, leading to a retreat of bearish positions by traders.
“Investors unwound their bearish positions they had built prior to the weekend’s meeting,” said Daniel Hynes, senior commodity strategist at ANZ. “With the worst fears not panning out,” he added, prices were lifted further.
Concerns over Iranian oil supply were also front and center. An Iranian diplomat stated on Monday that Tehran is poised to reject a new US proposal aimed at reviving the nuclear deal, citing unmet demands regarding uranium enrichment and US sanctions. A collapse in negotiations would likely keep sanctions in place, restricting Iranian oil exports and supporting global oil prices.
Tensions have also been heightened by continued conflict in Eastern Europe. Ukraine’s recent drone strike on Russian military assets has renewed focus on geopolitical risk premiums tied to energy markets.
In North America, wildfires in Alberta — Canada’s main oil-producing region — have led to a temporary shutdown of oil sands operations. Reuters estimates show that roughly 344,000 barrels per day of production have been impacted, amounting to around 7% of Canada’s total output. The disruption is significant, nearly matching the volume of crude OPEC+ added to global supply in its latest agreement.
Adding further support to oil prices is a recent decline in the US dollar, which makes commodities priced in dollars cheaper for holders of other currencies. A dollar index tracking the greenback fell to its lowest point since July 2023 on Monday before stabilizing slightly.
Still, some analysts believe the recent rally may be short-lived.
“Yesterday’s price rally might have come as a surprise, but the recalibration of the supply/demand balance implies sub-$70 prices are justified,” said Tamas Varga, an analyst at brokerage PVM.
Despite the recent gains, oil prices remain down about 13% for the year, as concerns over weaker global demand — driven by economic uncertainties and trade tensions — continue to weigh on the market.
