Oil prices fell to multi-year lows as OPEC+ announced a significant supply increase. The move highlighted concerns about oversupply despite sluggish global demand. The group, led by Saudi Arabia and Russia, will add 411,000 barrels per day beginning in June.
The market reacted sharply to the news. Brent crude fell below $59 a barrel, a level not seen since early 2023, while West Texas Intermediate (WTI) dropped to nearly $56, marking a steep decline of over 4% in a single trading day. Energy stocks and futures followed suit, indicating increased market volatility.
OPEC+ Shift Threatens Market Stability
OPEC+ has announced a major rise in oil output, adding 411,000 barrels per day in June, following previous increases in April and May. This faster unwinding of production restrictions has hindered efforts to stabilise the global oil market, especially as demand forecasts in Asia weaken and fears about the global economic outlook grow.
In their recent conference, spearheaded by Saudi Arabia and Russia, significant producers called for an urgent shift back to output norms amid long-standing overproduction by some members, particularly Iraq and Kazakhstan. The move is a return to the OPEC+ strategy amid increasing frustration with long-term supply cuts initially set to support high oil prices.
Oil prices declined sharply in Asian trading as markets reacted rapidly to OPEC+’s surprise policy action. Brent July fell 4.6% to $58.50 a barrel, and WTI June declined 5.1% to $55.30, both hitting four-year lows.
The decline came after eight major OPEC+ nations, including the UAE, Kuwait, and Kazakhstan, resolved on May 3 to speed up the reversal of past production cuts. Originally set to phase out gradually up to mid-2026, more than one million barrels per day will now be restored to the market by June.
OPEC+ said in a statement on Saturday that
The gradual increases may be paused or reversed subject to evolving market conditions. This flexibility will allow the group to continue to support oil market stability. The eight OPEC+ countries also noted that this measure will provide an opportunity for the participating countries to accelerate their compensation.
Since the beginning of 2023, OPEC+, representing nearly 40% of the worldwide oil supply, has cut production by about 2.2 million barrels daily. But that coordinated approach is now breaking down. In April, the company raised output to 135,000 barrels per day, which was seen as a message to threaten nonconformists and restore internal consensus.
Stocks Dip, Forecasts Cut, Dollar Weakens
Asian markets opened lower this week, impacted by oil price movements and thin trading volumes due to holidays in Japan, Hong Kong, and China. U.S. stock futures also declined after President Trump announced that no trade talks were planned with China.
Oil producers accounted for the majority of losses while Dow futures plummeted more than 300 points. Bloomberg reported that S&P 500 and Nasdaq-100 futures declined around 0.8%. Barclays reduced its 2025 Brent crude forecast by $4 to $66 due to low demand and rising supply threats.
The US dollar fell against Asian currencies, adding further pressure to oil prices. The Taiwanese dollar rose 5% in one day, its biggest increase in 30 years. Moreover, gold rose as investors sought refuge. S&P 500 futures sank 0.7%, as European markets also declined.
Conclusion
The OPEC+ decision may offer short-term relief to oil-importing countries, but its long-term economic impact remains uncertain. While lower oil prices can help reduce inflation in consumer economies, they may also strain the state budgets of oil-dependent nations.
Energy analysts are watching how the market responds to the increased supply. They are also monitoring to see if demand will rebound sufficiently in the second half of 2025 to offset surplus supply.
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