Oil prices plunge over $2 as OPEC+ accelerates output hikes
Oil prices were down more than $2 a barrel in Asian trade on Monday, on the back of rising concerns over an uncertain demand outlook due to supply overhang in the market in the wake of OPEC+'s move to further speed up oil output hikes.
Brent crude futures dropped $2.21, or 3.61 per cent, to $59.08 a barrel, while US West Texas Intermediate crude was at $56.00 a barrel, down $2.29, or 3.93 per cent.
Both contracts touched their lowest since April 9 at Monday's open after OPEC+ agreed to accelerate oil production hikes for a second consecutive month, raising output in June by 411,000 barrels per day (bpd), Reuters reported.
The June increase from the eight will take the total combined hikes for April, May and June to 960,000 bpd, representing a 44 per cent unwinding of the 2.2 million bpd of various cuts agreed on since 2022, according to Reuters calculations.
'The May 3 OPEC+ decision to raise production quotas another 411,000 bpd for June adds to the market expectation that the global supply/demand balance is moving to a surplus,' Tim Evans, founder of Evans on Energy said in a note.
The group could fully unwind its voluntary cuts by the end of October if members do not improve compliance with their production quotas, the report said, citing unnamed OPEC+ sources.
Saudi Arabia is reportedly pushing OPEC+ to accelerate the unwinding of earlier output cuts to punish fellow members Iraq and Kazakhstan for poor compliance with their production quotas.
The 6-month Brent price spread flipped to a contango of 11 cents a barrel for the first time since December 2023, with oil cheaper now than in future months, reflecting expectations that the market is amply supplied.
Barclays and ING have also lowered their Brent crude forecasts following the OPEC+ decision.
Barclays reduced its Brent forecast by $4 to $66 a barrel for 2025 and by $2 to $60 a barrel for 2026, while ING expects Brent to average $65 this year, down from $70 previously.
'We now expect OPEC+ to phase out the additional voluntary adjustments by October 2025 but also expect slightly slower US oil output growth,' Barclays analyst Amarpreet Singh said in a note.
The net impact of the higher OPEC+ output and lower US output has increased Barclays' estimate of supply in 2025 by 290,000 bpd for 2025 and 110,000 bpd for 2026, he said.
ING analysts led by Warren Patterson said the global oil balance is expected to move deeper into surplus throughout 2025.
'The oil market has been dealing with significant demand uncertainty amid tariff risks. This change in OPEC+ policy adds to uncertainty on the supply side,' they added.
Meanwhile, tensions flared in the Middle East after Israeli Prime Minister Benjamin Netanyahu vowed to retaliate against Iran for the Tehran-backed Houthi group firing a missile that landed near Israel's main airport.
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