London — Crude oil prices surged sharply at the beginning of the week, with increases exceeding 3% from the market opening. Brent crude surpassed the $65.50 mark, while WTI approached $63.84. This spike occurred despite OPEC+ confirming an increase in production of 411,000 barrels per day starting in July, a figure that, although significant, fell short of previous estimates.
One of the key factors behind this rise was the recent weakness of the U.S. dollar. New tariff measures announced by the U.S. government, particularly on products such as steel and aluminum, sparked fears of a potential economic slowdown. These concerns boosted crude prices, as a weaker dollar makes oil, priced in dollars, more attractive in international markets.
Meanwhile, wildfires in Alberta, Canada, have caused severe disruptions in crude oil and gas production. With dozens of active fires, some of which were out of control, several facilities were forced to suspend operations temporarily. This has reduced available supply, particularly in a region critical to the North American energy market.
On the geopolitical front, tensions escalated following a series of drone attacks carried out by Ukraine against military infrastructure on Russian territory. The strikes destroyed several aircraft, including long-range planes capable of launching missiles, a significant loss amid the ongoing conflict. Such events typically raise risk perceptions and increase the geopolitical premium in the oil market.
Although the OPEC+ production increase had been anticipated for months, the current situation introduces new uncertainties. The organization remains committed to progressively increasing production until reaching 2.2 million barrels per day by October, but external tensions could complicate market stabilization.
The balance between supply and demand is being shaped by a combination of factors that go beyond purely economic considerations. Disruptions due to natural disasters, armed conflicts, and aggressive trade policies are driving unpredictable behavior in the oil market. This has created an environment where prices respond swiftly to any significant event.
Given this scenario, future market movements will depend on how these conditions evolve. Decisions by major crude oil-producing countries, geopolitical developments, and climate-related events will continue to set the tone for price behavior.
In conclusion, the recent increase in oil prices is the result of a combination of forces, including international tensions, natural disasters, and economic policies. Although production is rising, uncertainty remains high. Volatility may persist in the coming weeks as the market adapts to an increasingly unstable global context.”
*Analysis by Antonio Di Giacomo, Financial Markets Analyst for LATAM at XS
