Oil ends at four-year lows as Opec+ accelerates output hikes
[NEW YORK] Oil fell by more than US$1 a barrel on Monday to settle at over four-year lows as an Opec+ decision to expedite its output hikes stoked fears about rising global supply at a time when the demand outlook is uncertain.
Brent crude futures settled at US$60.23 a barrel, down US$1.06, or 1.7 per cent. US West Texas Intermediate crude fell US$1.16, or 2 per cent, to end at US$57.13 a barrel. Both benchmarks settled at their lowest since February 2021.
Last week, Brent shed 8.3 per cent and WTI lost 7.5 per cent after Saudi Arabia signalled it could cope with a prolonged lower price environment. That offset optimism on the demand side that US-China tariff talks could occur, Saxo Bank analyst Ole Hansen said.
On Saturday, Opec+ agreed to further speed up oil production hikes for a second consecutive month, raising output in June by 411,000 barrels per day (bpd).
The June increase by eight participants in the Opec+ group, which includes allies like Russia, will take the total combined hikes for April, May and June to 960,000 bpd. That represents a 44 per cent unwinding of the 2.2 million bpd of various cuts agreed on since 2022, according to Reuters calculations.
'For the producers outside of the Opec+ group, which is now nearly 60 per cent of global oil supply, the market share gains may have reached a peak if these new barrels are fed into the market and prices move lower,' said Peter McNally, a Third Bridge analyst.
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The group could fully unwind its voluntary cuts by the end of October if members do not improve compliance with their production quotas, Opec+ sources told Reuters.
Opec+ sources have said Saudi Arabia is pushing Opec+ to speed up the unwinding of earlier output cuts to punish fellow members Iraq and Kazakhstan for poor compliance with their production quotas.
'The production increase, instigated by Saudi Arabia, is as much about challenging US shale supply as it is to penalise members that have benefited from higher prices while flouting their production limits,' Saxo Bank's Hansen said.
ING and Barclays have also lowered their Brent crude forecasts following the Opec+ decision.
Barclays reduced its Brent forecast by US$4 to US$66 a barrel for 2025 and by US$2 to US$60 for 2026, while ING expects Brent to average US$65 this year, down from US$70 previously.
'Expectations of mounting global oil inventories in the coming months given the demand deterioration expected off of the Trump tariffs is tending to accentuate bearish supply-side news,' Jim Ritterbusch, of US energy consultancy Ritterbusch and Associates, said in a note.
Widespread recession fears and weak refined fuel import demand are also weighing on oil prices, said David Wech, chief economist at Vortexa, adding that since mid-February the data analytics firm had noted an approximate 150 million-barrel build in global crude stocks in onshore tanks and on tankers at sea.
Oil below US$50 a barrel could hurt final investment decisions for offshore projects, Girish Saligram, CEO of oilfield services company Weatherford International, said at the Offshore Technology Conference in Houston.
'If we see prices sustain below US$50 a barrel, I think it could create a little bit of a lull for some of the new final investment decisions,' Saligram said. REUTERS
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