Oil jumps 1.8% as OPEC+ sticks to slow unwind, lifting Shell and BP

Brent crude rose 1.8% to over $65 a barrel on Monday afternoon after OPEC+ confirmed it would maintain a gradual approach to increasing oil supply.

The news also gave a lift to energy stocks, with shares in Shell PLC (LSE:SHEL, NYSE:SHEL) and BP PLC (LSE:BP.) both trading higher.

In a research note, UBS said investors had been bracing for a more aggressive rise in output from the oil producers' alliance, which includes major exporters like Saudi Arabia and Russia.

Instead, the group stuck to its pre-announced schedule, increasing production by 411,000 barrels per day in July. This is the third monthly step in a controlled unwind that began in April.

What is OPEC+ and why does it matter?

OPEC+ is a coalition of the Organisation of the Petroleum Exporting Countries and other oil-producing nations that coordinate output levels to manage global prices.

Since the pandemic, the group has tightly managed supply to support the oil market. With demand rising, it has started to gradually increase production.

UBS says the market welcomed the decision not to accelerate the pace further. Despite concerns, the bank notes that the physical oil market remains tight, meaning it can absorb the extra supply.

Demand is rising with hotter weather in the Middle East increasing power generation needs, while summer travel and religious pilgrimages are expected to boost consumption.

No flood of oil expected

One key reason prices are rising despite more barrels on paper is that some OPEC+ members are already pumping above their official limits. According to UBS, this means the new quotas do not necessarily translate into a significant increase in actual supply.

The note adds that oil inventories remain low and recent supply disruptions in Canada and the risk of unrest in Libya could offer further support to prices.

Outlook steady but risks remain

UBS forecasts Brent at $68 a barrel through to mid-2026, although it warns that seasonal demand will ease later this year. If trade tensions persist or demand growth falters, oil prices could come under renewed pressure.

For now, with the market tight and OPEC+ playing it steady, the outlook remains broadly supportive for oil producers and energy shares alike.

In afternoon trading, Shell was up 1.2% and BP 1% against the backdrop of largely flat and subdued wider stock market.