Oil prices fall after OPEC+ decision to accelerate production increases

Oil prices are falling sharply at the start of the new week. OPEC+ is preparing to accelerate production increases, fuelling concerns about a significant market supply surplus. However, the outlook for oil demand remains uncertain because of US tariffs.

Shortly before 08:30 CEST, the price of North Sea Brent crude was down 2.5 percent to below 59.80 dollars per barrel, having fallen by nearly four percent to below 59 USD per barrel after trading began in Asia. The price of US light crude WTI was down 2.7 percent at 56.70 dollars per barrel.

Eight OPEC+ countries, comprising members of the Organization of the Petroleum Exporting Countries (OPEC) and their allies led by Russia, agreed on Saturday to increase production further from June, by 411.000 barrels per day. Producers are thus continuing their gradual production increases. Most recently, they raised production from May, also by 411.000 barrels per day.

After the June increase, the total combined increase in oil production for April, May and June will reach 960.000 barrels per day. According to Reuters, this represents the unwinding of 44 percent of the various cuts agreed since 2022, which amount to 2.2 million barrels per day.

“The OPEC+ decision on 3 May to increase production quotas for June by a further 411.000 barrels per day adds to market expectations that the global supply-demand balance is shifting towards a surplus,” said Tim Evans, an analyst at Evans on Energy.

The group could fully unwind its voluntary cuts by the end of October if members do not improve their compliance with production quotas, OPEC+ sources told Reuters. According to them, Saudi Arabia is pressing the group to accelerate the unwinding of previous production cuts, thereby punishing Iraq and Kazakhstan, other members of the group, for poor compliance with production quotas.

In response to the OPEC+ decision, Barclays and ING lowered their forecasts for Brent oil prices this year. Barclays cut its forecast by four dollars to 66 dollars per barrel, while ING now expects Brent to average 65 dollars per barrel this year, five dollars less than previously forecast.

“We now expect OPEC+ to gradually unwind its additional voluntary cuts by October 2025, but we also expect slightly slower growth in US oil production,” said Barclays analyst Amarpreet Singh.

ING analysts also warned that the oil market is facing considerable demand uncertainty related to the introduction of tariffs. The OPEC+ policy shift is increasing uncertainty on the supply side, and the global oil supply-demand balance will move further into surplus this year.

At the same time, tensions are rising in the Middle East. Israeli Prime Minister Benjamin Netanyahu vowed retaliation against Iran after the Iran-backed Houthi group fired a missile that landed near Israel’s main airport. Iran said on Sunday that if the United States or Israel attacked, Tehran would retaliate.

Oil prices in dollars per barrel (about 159 liters):