Oil Markets in Flux: Navigating Supply Surges, Geopolitical Tensions, and Shifting Economic Tides

Oil futures saw changes, as markets balanced expectations of increased supply from major producers and a weaker U.S. dollar against a mix of U.S. economic and market signals. Brent crude dipped slightly to $67.07, and WTI crude fell to $65.36. Brent has traded within a narrow range since late June, with receding concerns over Middle East supply disruptions following a ceasefire. Downward pressure emerged from a U.S. crude inventory rise of 680,000 barrels last week, unusual for the summer demand season.

Analysts note that current oil price movements are influenced by potential OPEC+ supply, mixed U.S. inventory data, an uncertain geopolitical outlook, and unclear macroeconomic policies. Four OPEC+ sources indicated a planned output increase of 411,000 barrels per day next month. With current geopolitical calm, oil futures are expected to trade in a tighter range, with a weaker dollar offering the main potential for upward movement.

A softer U.S. dollar, recently at a three-and-a-half-year low, typically supports oil prices by making the commodity more affordable for international buyers. Upcoming U.S. non-farm payrolls data will influence expectations for Federal Reserve interest rate cuts, which could stimulate economic activity and boost oil demand. Official U.S. oil stockpile data is also due.

In South Korea, consumer prices surged in June due to higher oil costs, rising 2.2% year-on-year, but are expected to moderate in July if oil prices and exchange rates stabilize. The Bank of Korea anticipates inflation to fluctuate around 2% but remains cautious due to external uncertainties.

Crude oil has consolidated in a tight range for five consecutive days. Support around $65 has held, suggesting a potential for an upward breakout. Despite downward pressure, crude showed its largest one-day gain since a recent high of $78.44. Potential resistance areas include around $68.86.

Oil prices edged up on Tuesday due to positive demand indicators, including improved Chinese factory activity in June. Expectations of Saudi Arabia raising crude prices for Asian buyers and strong premiums for Russian crude also suggest robust demand. While OPEC+ is expected to increase output by 411,000 barrels per day next month, some members like Kazakhstan have already boosted production. Investors are also monitoring U.S. President Donald Trump's July 9 tariff deadline and ongoing trade negotiations.