Crude Oil Prices Surge Amid OPEC+ Output Hikes and Geopolitical Shifts: A Closer Look at the June WTI Rally

The June West Texas Intermediate (WTI) crude oil contract closed up $1.11 on May 10, settling at $61.02 per barrel—a notable rebound after months of price erosion driven by oversupply concerns and economic headwinds. This surge was not merely a blip but a reflection of complex interplays between geopolitical developments, OPEC+ policy shifts, and seasonal demand dynamics. Let’s dissect the factors fueling this rally and assess its sustainability.

OPEC+’s Strategic Production Adjustments: A Double-Edged Sword

On May 1, OPEC+ announced a significant output increase of 411,000 barrels per day (bpd) for June—a move equivalent to three monthly increments. While this decision aimed to address near-term oversupply, it initially confused markets. However, traders soon interpreted it as a strategic move to balance short-term tightness with future supply growth. The announcement highlighted OPEC+’s struggle with compliance, particularly as Kazakhstan overproduced, but also underscored its proactive role in managing sentiment.

The group’s ability to unwind production cuts gradually suggests a nuanced approach to prevent prices from collapsing further. Analysts note that this flexibility could keep WTI prices anchored above $60/barrel in the near term, though long-term compliance risks remain.

Geopolitical Catalysts: Trade Deals and Sanctions

The U.S.-UK trade deal, announced concurrently with the OPEC+ decision, became an unexpected bullish catalyst. Though its direct impact on oil trade was negligible, the agreement symbolized a pivot away from protectionism and eased fears of escalating global trade wars. The deal’s focus on reducing non-tariff barriers and expediting goods flows into the UK market spurred optimism about improved economic activity—a key driver for oil demand.

Meanwhile, U.S. sanctions on Chinese “teapot” refineries—which rely on discounted Iranian and Russian oil—disrupted supply chains. Forced to seek costlier alternatives, these refineries indirectly supported prices by reducing the availability of low-cost barrels.

Seasonal Demand and Refinery Activity: A Summer Tailwind

The tapering of Atlantic Basin refinery maintenance by late May and rising European refinery utilization rates (projected to climb to 88-90% by month-end) added 600,000 bpd to crude demand. This seasonal ramp-up, coupled with anticipation of the U.S. summer driving season, created upward pressure on prices. The International Energy Agency (IEA) further bolstered optimism by forecasting a 1.3 million bpd global demand increase in Q3 2025—a figure roughly matching OPEC+’s production hikes.

Market Sentiment and Technical Factors: The “Smile” Curve

The oil futures market’s “smile” curve—backwardation in near-term contracts (July Brent at a $0.74 premium to October)—signaled tight physical supplies, while contango in longer-dated contracts hinted at future oversupply. This structure created a “negative carry” environment for physical traders but provided short-term price support as investors hedged against demand spikes. WTI’s rebound from technical support levels ($57-58/barrel) also fueled buying as traders closed bearish positions.

Analyst Revisions: A Temporary Divergence from Bearish Forecasts

Despite bullish momentum, analysts like Morgan Stanley and Standard Chartered had recently slashed their 2025 price forecasts due to U.S. trade policy risks and global growth concerns. The May 10 rally, however, reflected a temporary divergence from these bearish expectations, with traders prioritizing positive trade news and OPEC+’s tactical moves over long-term demand destruction risks.

Conclusion: A Delicate Balance Between Rally and Risk

The June WTI rally to $61.02/barrel underscores the market’s sensitivity to geopolitical shifts and OPEC+’s policy agility. Near-term factors—including European refinery demand, the U.S.-UK trade deal, and OPEC+’s output adjustments—provide a floor for prices. However, investors must remain cautious: the IEA’s Q3 demand growth forecast hinges on robust Asian consumption, particularly from India and China, which imported $29 billion worth of Iraqi oil in April.

Longer term, the contango in longer-dated contracts and downward analyst revisions signal lingering risks. OPEC+’s compliance challenges, U.S. sanctions on refiners, and the potential for renewed trade tensions could reignite downward pressure. For now, the $60/barrel threshold appears resilient, but sustained gains will require stronger demand signals and OPEC+ discipline.

In short, while the June rally is a welcome reprieve, the path to $70/barrel remains fraught with geopolitical and economic uncertainties. Investors should monitor OPEC+ production compliance, U.S.-China trade developments, and the IEA’s demand data closely to gauge whether this rebound is a fleeting pause or the start of a sustained recovery.