Oil plummets on OPEC+ supply boost plan
Oil prices tumbled as the global oil market reacted to a larger-than-expected supply boost from eight members of the Organization of the Petroleum Exporting Countries and its allies (OPEC+).
IMAGE: OPEC's logo. Getty Images
The eight OPEC+ members - Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria, and Oman - have agreed to collectively increase its supply by 411,000 b/d in June, from May’s production levels.
This is the second month in a row that they plan to expedite the unwinding of their joint 2.2 million b/d output cuts. Key producers, including Saudi Arabia and Russia, met virtually on 3 May and agreed to cut output by nearly three times the initially planned volume, OPEC said.
The coalition attributed the decision to “current healthy market fundamentals, as reflected in the low oil inventories” as it aims to gradually phase out its collective production cuts between April 2025 and June 2026.
In April, the coalition agreed to increase supply by 411,000 b/d, above the scheduled hike of 135,000 b/d. “This past weekend, the group decided to go with a similarly aggressive supply increase for June,” ING Bank’s head of commodities strategy Warren Patterson remarked.
OPEC’s de-facto leader Saudi Arabia is now slated to produce 9.4 million b/d in June. Russia’s output will surpass 9.2 million b/d, while Iraq and the UAE will produce about 4.1 million b/d and 3.1 million b/d, respectively, the OPEC secretariat said.
The news has pushed Brent crude’s price below the $60/bbl benchmark. “The Saudis are the driving force behind larger-than-scheduled supply increases to punish members who’ve repeatedly produced above their targets,” Patterson said.
The group reaffirmed its commitment to ensure that the overproducing countries like Kazakhstan and Iraq compensate for the excess output in the coming months. Both members have repeatedly exceeded their quotas.
The news emerges amid growing turbulence in the commodities market, already unsettled by US President Donald Trump’s tariff threats, which could slow demand growth, analysts say.
“The oil market has been dealing with significant demand uncertainty amid tariff risks,” Patterson said. “This change in OPEC+ policy adds to uncertainty on the supply side. Adding to the uncertainty: the group will decide on output levels month by month,” he further added.
The eight countries will meet again on 1 June to decide on July production levels, according to the OPEC statement.
By Aparupa Mazumder
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