Eight OPEC+ countries agreed on Thursday to continue phasing out oil output cuts by increasing output by 411,000 barrels per day in May, a decision that extended the sharp losses oil prices witnessed this week. The members of the Organization of the Petroleum Exporting Countries and allies led by Russia were set to raise output by 135,000 barrels per day next month as part of a plan to gradually unwind their most recent output cuts.
However, after a meeting of the eight countries held online on Thursday, the group announced it would boost further output in May, citing “continuing healthy market fundamentals and the positive market outlook.”
Oil prices, which had already lost over 4 percent on U.S. President Donald Trump’s announcement of tariffs on trading partners, extended declines after OPEC+ updated its plans, with Brent crude dropping over 6 percent to below $70 a barrel.
Supply disruption fears dwindle
The group’s latest announcement has reduced supply disruption fears that were arising following Trump’s decision to restore maximum pressure on Tehran. The United States Treasury announced in late February new sanctions on Iran, which for the first time targeted an independent Chinese refiner, among other entities and vessels involved in supplying Iranian crude oil to China. Analysts noted that the impact of these sanctions is limited, but they raise the risk premium as they signal a clear escalation in the sanctions policy.
This decision marked Washington’s fourth round of sanctions against Iran since U.S. President Donald Trump promised in February to reimpose a “maximum pressure” campaign on Tehran, pledging to drive the country’s oil exports to zero.
May hike to unwind most recent 2.2 million bpd output cut
The May hike is the next increment of the plan to gradually unwind the most recent output cut of 2.2 million bpd, which came into effect this month. “The eight participating countries will implement a production adjustment of 411 thousand barrels per day, equivalent to three monthly increments, in May 2025…This comprises the increment originally planned for May in addition to two monthly increments,” stated OPEC+.
OPEC+ also has 3.65 million bpd of other output cuts in place until the end of next year to support the market. The total of 5.85 million bpd is equal to about 5.7 percent of the global oil supply.
Read: Oil prices fall to $69.35, set for worst week in months over global demand concerns
Members to fully compensate overproduction
“The eight countries reaffirmed their commitment to the voluntary production adjustments agreed at the 53rd JMMC meeting on 3 April 2024. They also confirmed their intention to fully compensate any overproduced volume since January 2024 and to submit updated front-loaded compensation plans to the OPEC Secretariat by 15 April 2025,” added the group.
Notably, Kazakhstan has been producing oil above the targets agreed with OPEC+ in recent months. OPEC data also shows some other OPEC+ nations producing above their quotas but by far smaller amounts.
The eight OPEC+ countries said they would hold monthly meetings to review market conditions, conformity and compensation. The group’s members will next meet on the 5th of May to decide on June production levels.
