Crude oil prices jumped in early morning trade on June 2 even as OPEC+ confirmed a planned supply increase starting in July, with factors such as declining U.S. crude stocks and Russia–Ukraine geopolitical tensions supporting prices.
Brent crude oil
futures were trading at $65.38 per barrel as of 8:55 a.m. ET on June 2, up by 4.14 percent for the day. In a May 31
statement, OPEC+, a group comprising the Organization of the Petroleum Exporting Countries (OPEC) and other oil producers, including Russia, announced it would raise oil production by 411,000 barrels per day (bpd) beginning in July.
OPEC+ had previously
reduced crude oil output by 2.2 million barrels per day. In December 2024, however, the group agreed to bring back this supply to the market. The 411,000-bpd production boost in July is part of this scheduled supply addition that began in May.
Despite the news of a supply jump, oil prices surged in early morning trade on July 2 as several recent events continued to hold the price up.
For one, U.S. crude oil inventories, excluding those in the Strategic Petroleum Reserves, fell by 2.8 million barrels for the week ending May 23 compared to the previous week, according to a May 29
report from the Energy Information Administration (EIA).
A decline in inventory suggests a market shortage or that people are using more fuel than usual, putting upward pressure on prices.
Meanwhile, tensions between Ukraine and Russia
heightened after Kyiv launched a massive drone strike on June 1 that hit multiple Russian airbases and resulted in an estimated $7 billion in damage to Moscow. Russian politicians reacted by accusing Ukraine of trying to stall peace negotiations.
In a June 2
post, ING said the July supply increases were “in line with our expectations.” By the end of July, OPEC+ is expected to bring back “more than 60 percent of the 2.2m b/d worth of planned supply increases.”
“We’re also assuming that OPEC+ will continue with these large supply hikes. This would mean that the full 2.2m b/d of supply will be brought back by the end of the third quarter of this year, 12 months ahead of schedule. This is the key assumption behind our price forecast for ICE Brent to average US$59/bbl in the fourth quarter.”
US Oil Drilling
Oil prices have been declining since mid-January, which could pose a problem for U.S. producers.WTI crude
futures, a benchmark for North American crude oil, have dipped from a peak of $80.59 per barrel on Jan. 16 to $63.54 as of 08:55 a.m. EDT on June 2, a decline of more than 21 percent.
According to ING, lower prices are weighing on the United States’ drilling activity, with the U.S. oil rig count falling by four sites to 461 during the most recent week, its fifth straight weekly decline.
“Given our view for oil prices to move lower towards the end of this year, we would expect to see additional slowing in drilling activity, calling into question forecasts for growth in US oil supply next year,” ING said.
According to a May 26
report from the Federal Reserve Bank of Dallas, large oil companies—with crude oil production of 10,000 barrels per day or more—require a WTI oil price of $61 per barrel to drill profitably.
For companies producing less than 10,000 barrels per day the average price required is higher at $66 per barrel.
The Trump administration has taken steps to boost domestic oil production.
On Feb. 14, President Donald Trump signed an executive order
creating the National Energy Dominance Council.
The White House panel will advise the president on “strategies to achieve energy dominance by improving the processes for permitting, production, generation, distribution, regulation, and transportation across all forms of American energy,” according to a White House Fact Sheet.
In March, Trump
met with U.S. oil and gas executives, discussing issues such as tax credits, permit reforms, and tariffs.
On April 18, the Department of the Interior
said it was developing a new initiative that will guide future drilling auctions in federal waters.
The “High Arctic” regions off the coast of Alaska were added to the federal offshore leasing map for the first time. In addition, companies could also potentially be allowed to tap into new reserves along the Pacific, Arctic, and Atlantic coasts.
“Under President Donald J. Trump’s leadership, we are unlocking the full potential of our offshore resources to benefit the American people for generations to come,” Interior Secretary Doug Burgum said in a statement.
