Oil prices continued their upward momentum, driven by renewed supply concerns and a weakening U.S. dollar. Brent crude hovered near $65 per barrel, while West Texas Intermediate traded around $63, following strong gains the previous day.
The price rally was fueled by geopolitical tensions and OPEC+’s decision to stick with a modest production increase of 411,000 barrels per day in July—less than markets had feared. This led to a sharp unwinding of bearish positions, as traders had braced for a more aggressive output hike.
Adding to the bullish sentiment, the U.S. dollar remained under pressure, touching its lowest levels since July 2023. A weaker dollar typically boosts commodities like oil by making them more affordable to international buyers.
Geopolitical uncertainty also played a key role. Iran is expected to reject a U.S. nuclear deal proposal that fails to meet its core demands, potentially keeping sanctions in place and limiting Iranian oil exports. Meanwhile, recent talks between Russia and Ukraine yielded little progress, dampening hopes for a near-term resolution to the conflict.
Further tightening the supply outlook, wildfires in Alberta, Canada, have shut down nearly 350,000 barrels per day of crude production—about 7% of the country’s output—posing an additional threat to already constrained supplies.
Analysts say the market is reacting to the absence of worst-case scenarios, with rising seasonal demand, constrained supply growth, and geopolitical instability all contributing to the recent surge in prices.