Source Credit : Reuters
OPEC+ has announced its decision to increase oil production for the second consecutive month, with output set to rise by 411,000 barrels per day in June. This move comes despite declining prices and projections of reduced demand.
After a brief online meeting lasting just over an hour, the producer group announced a supply increase. They emphasized that the oil market fundamentals are strong and inventories are at low levels.
In April, oil prices plummeted to a four-year low, dropping below $60 per barrel. This sharp decline was triggered by OPEC+'s announcement of a significant production increase for May, coupled with growing concerns over global economic instability due to U.S. President Donald Trump's tariffs.
The recent increase in oil prices can be attributed to President Trump's urging of OPEC+ to boost production. President Trump is scheduled to visit Saudi Arabia later this month. In December, eight OPEC+ countries, which have been adhering to the group's latest output reduction of 2.2 million barrels per day, agreed to gradually eliminate this cut through monthly increments of approximately 138,000 barrels per day starting in April 2025.
The increase in June from the eight will bring the total combined hike for April, May, and June to 960,000 barrels per day (bpd), representing a 44% reversal of the 2.2 million bpd cut, according to calculations by Reuters. Brent crude futures dropped more than 1% on Friday to $61.29 per barrel as traders prepared for additional oil from OPEC+.
According to UBS analyst Giovanni Staunovo, oil prices are expected to decrease on Monday as a result of the recent OPEC+ news, coupled with ongoing trade tensions and apprehensions surrounding economic growth. “We continue to call this a ‘managed’ unwind of cuts and not a fight for market share,” he said.
This week, Reuters reported that officials from Saudi Arabia, the de facto leader of OPEC+, have informed allies and industry officials that they are not willing to support oil markets by implementing additional supply cuts.
“Compliance again appears to be the key focus, with Kazakhstan and Iraq continuing to miss their compensation targets, alongside Russia to a lesser extent,” said Helima Croft of RBC Capital Markets.
Kazakhstan has recently made a bold decision to prioritize its national interests over those of the OPEC+ group. This was evident when the country's energy minister announced that they would be making independent decisions regarding oil production levels. Despite a 3% decrease, Kazakhstan's oil output in April exceeded its OPEC+ quota. This move showcases Kazakhstan's commitment to safeguarding its own interests in the energy sector.
OPEC+, comprised of the Organization of the Petroleum Exporting Countries and allies like Russia, continues to reduce output by nearly 5 million barrels per day, with many of these cuts expected to remain in effect until the end of 2026. The group is scheduled to convene a comprehensive ministerial meeting on May 28th.
