Oil prices fell more than $2 a barrel on Monday as OPEC+ is set to further speed up oil output hikes, raising concerns about increased supply. Brent crude futures dropped $2.04 a barrel, or 3.35 percent, to $59.04 a barrel, while U.S. West Texas Intermediate crude was at $55.96 a barrel, down $3.10, or 3.75 percent. Both contracts touched their lowest levels since April 9 at Monday’s open after OPEC+ agreed to accelerate oil production hikes for a second consecutive month, increasing output in June by 411,000 barrels per day (bpd).
June increase brings total hikes to 960,000 bpd
The June increase from the eight will take the total combined hikes for April, May, and June to 960,000 bpd, which represents a 44 percent unwinding of the 2.2 million bpd of various cuts agreed upon since 2022, according to Reuters calculations. “The May 3 OPEC+ decision to raise production quotas another 411,000 bpd for June adds to the market expectation that the global supply/demand balance is moving to a surplus,” Reuters reports, citing Tim Evans, founder of Evans on Energy. The group could fully unwind its voluntary cuts by the end of October if members do not improve compliance with their production quotas, OPEC+ sources told Reuters.Â
OPEC+ sources have indicated that Saudi Arabia is advocating for the group to expedite the unwinding of earlier output cuts to penalize fellow members Iraq and Kazakhstan for inadequate compliance with their production quotas. Barclays lowered its Brent forecast by $4 to $66 a barrel for 2025 and by $2 to $60 a barrel for 2026 due to the accelerated phase-out by OPEC+, analyst Amarpreet Singh noted.
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Tariff developments and OPEC+ pivot affect oil prices
“Tariff-related developments have certainly been a drag, but the OPEC+ pivot has also been a significant driver of the recent decline in oil prices,” Barclays stated in a note dated Sunday. OPEC+ sources have reiterated that Saudi Arabia is pushing the group to accelerate the unwinding of earlier output cuts to address compliance issues from Iraq and Kazakhstan.
Barclays now expects OPEC+ to phase out the additional voluntary adjustments by October 2025, but also anticipates slightly slower U.S. oil output growth. Overall, this adjustment loosens their balance estimates by 290 thousand barrels per day (kbd) for 2025 and 110 kbd for 2026. “That would result in 390 kbd and 230 kbd increases in our 2025 and 2026 OPEC crude forecasts, respectively,” Barclays noted. The firm now predicts a decline in U.S. crude output by 100 kbd from the fourth quarter of 2024 to the fourth quarter of 2025, and by 150 kbd in 2026.
