Oil prices drop to over 3% after OPEC+ output hike

Oil prices dropped on Monday after OPEC+’s decision to accelerate production hikes for June.

During Monday’s Asian session, Brent futures slumped as much as 4.6% to $58.50 per barrel, while West Texas Intermediate futures dropped nearly 5% to $55.53 per barrel at a point, both at their lowest levels since February 2021.

On Saturday, eight OPEC+ members agreed to raise output by 411,000 barrels per day (bpd) next month, extending the group’s ongoing plan to unwind production cuts that began in April. The cumulative increase will reach 957,000 bpd in June, further weighing on prices already pressured by deteriorating global trade conditions.

The group, which accounts for around 40% of global oil supply, has jointly reduced production by approximately 2.2 million bpd in 2023. The quicker-than-expected phased rollback began with a 135,000 bpd increase in April, tripling to 411,000 bpd in May. The acceleration is seen as a punitive measure against members which failed to comply with agreed production quotas, with Kazakhstan and Iraq identified as recent overproducers.

According to the statement, Saudi Arabia, Russia, and six other members of the oil-producing countries will implement a production adjustment of 411,000 barrels a day in June, up from May’s 137,000 barrels.

The price of OPEC basket of twelve crudes stood at $68,16 a barrel on Monday, compared with $68,74 the previous Friday, according to OPEC Secretariat calculations.

OPEC+ member countries announced on Saturday that they would increase oil production in June.

The June increase from the eight producers in the OPEC+ group will take the total combined hikes for April, May and June to 960,000 bpd, representing a 44% unwinding of the 2.2 million bpd of various cuts agreed on since 2022, according to Reuters calculations.

The eight countries reiterated their collective commitment to achieve full conformity with the Declaration of Cooperation, including the additional voluntary production adjustments that were agreed to be monitored by the Joint Market Monitoring Committee (JMMC) during its 53rd meeting held on April 3rd 2024.

They also confirmed their intention to fully compensate for any overproduced volume since January 2024.

The group said the decision was after the eight OPEC+ countries, which previously announced additional voluntary adjustments in April and November 2023 (Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, and Oman), met virtually to review global market conditions and outlook.

The statement read, “In view of the current healthy market fundamentals, as reflected in the low oil inventories, and in accordance with the decision agreed upon on 5 December 2024 to start a gradual and flexible return of the 2.2 million barrels per day voluntary adjustments starting from 1 April 2025, the eight participating countries will implement a production adjustment of 411 thousand barrels per day in June 2025 from May 2025 required production level.

“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.”

The eight OPEC+ countries will meet on 1 June 2025 to decide on July production levels.

(Reuters)