20-05-2025
Oil market hammered as Opec+ announces major output hike
The global oil market was hammered on Monday as investors digested Saturday's announcement by Opec+ about going ahead with output hikes.
In morning trading, Brent crude futures fell 3.5 per cent, while US West Texas Intermediate crude fell 3.8 per cent. The market pared gains later in the day. Brent crude futures dropped by 90 cents, or 1.47 per cent, to $60.39 a barrel by 1320 GMT, while US West Texas Intermediate crude was at $57.31 a barrel, down 98 cents, or 1.68 per cent, Reuters reported.
Last week, Brent shed 8.3 per cent and WTI 7.5 per cent as Saudi Arabia said it could cope with lower prices. 'Opec+'s decision to extend the 411,000 barrels-per-day production increase planned for May into June has raised concerns about a potential global supply glut, especially at a time when trade tensions threaten to dampen demand,' Ole Hansen, head of commodities strategy at Saxo Bank, said in a note. Both Brent crude and WTI have fallen back towards the four-year lows last seen in the aftermath of the March sell-off triggered by President Trump's so-called 'Liberation Speech.'
Saudi Arabia has hinted at the possibility of further monthly increases, citing frustration over persistent overproduction from member countries such as Kazakhstan and Iraq. 'The resulting price decline appears, for now, to have aligned Saudi interests more closely with those of the US — specifically with Trump — than with Russia, a key member of the Opec+ group of producers,' Hansen said.
'The crude oil markets both look fairly weak, but we did see a bit of a bounce form the lows. Because of this, the market looks as if it is going to continue to attempt to find a bottom, in what has been a very ugly market,' Christopher Lewis, a proprietary trader on FXEmpire, wrote.
Technically, WTI's failure to break below $55.30 suggests some support, but bearish momentum persists unless prices reclaim resistance at $59.67. 'With OPEC+ bringing more barrels online and inventories swelling, traders are bracing for further downside unless demand signals improve. The oil prices forecast remains bearish in the near term, with supply concerns outweighing any tentative signs of a rebound,' technical analyst James Hyerczyk wrote.
At the same time, the strategy may serve to discipline US shale production, which faces headwinds in ramping up further and may even begin to roll over, if current low prices are being maintained in the coming months. 'This potential reduction in shale output could offer medium-term support for both crude oil and not least US natural gas, as the supply of associated gas from shale wells diminishes,' Hansen said.
Ahead of the weekend announcement, managed money long positions in crude oil declined by 15,700 contracts to 226,500 — well below the five-year average of 426,000 and the one-year average of 272,000. 'This suggests that choppy price action, the loss of momentum, and continued macro-driven selling are weighing on speculative interest,' Hansen said.
