Oil costs climb due to moderate production boost by OPEC+ and worry about Russian supply

In a surprising turn of events, oil prices have witnessed a 2% increase on Monday, with West Texas Intermediate, the gauge that tracks US crude, climbing by 1.96% and Brent, the benchmark for two thirds of the world's oil, rising by 1.98%.

This uptick comes amidst a global economic slowdown, which has resulted in less demand for crude oil this year. The slowing economy and less-than-stellar growth in China, the world's largest crude importer, have led to a decrease in crude prices this year.

The oil market has been volatile this year due to various factors, including President Trump's tariff plans and the Iran-Israel conflict. Adding to the mix, recent geopolitical tensions between Russia and Ukraine have also played a role in the fluctuating prices.

US President Donald Trump has expressed discontent with the situation in Ukraine and stated his readiness to impose new sanctions on Moscow. In response, the possibility of more sanctions on Russia is supporting oil prices.

Russian missiles and drones attacked Ukraine's capital Kyiv early on Sunday, causing four fatalities and setting government offices ablaze. Russia, despite the sanctions risks, has been intensifying its oil production, with Saudi Arabia, Angola, Iraq, and Russia itself increasing their production within OPEC+.

Saudi Arabia, aiming to secure and expand its market share, has announced plans to raise production quotas from October 2025 onward. OPEC+ agreed to increase production in October by 137,000 barrels per day, a notable slowdown from the monthly increases of around 400,000-550,000 bpd implemented since May this year.

Despite the market consensus of a sizeable inventory build by the end of the year and into 2026, the stance from OPEC+ may be to continue to test the market with higher output. According to Mr. Bell, the expectation for oil market balances has been built on higher production from OPEC+ countries, leading to an increase in global inventories and weighing on prices for the balance of 2025 and into 2026.

However, the forecast of Brent averaging $65 per barrel for the remainder of 2025 remains unchanged, and it is expected to continue holding close to $65 per barrel next year. This suggests that the current price increase might be a temporary phenomenon, influenced by geopolitical tensions rather than a fundamental shift in the oil market.

In conclusion, while the global economy and geopolitical tensions continue to impact oil prices, the market remains volatile and uncertain. As we move forward, it will be interesting to see how these factors evolve and how they influence the oil market in the coming months.