Crude oil prices plunged to a multi-year low following OPEC+’s decision to accelerate production hikes for June. During Monday’s Asian session, Brent futures slumped as much as 4.6% to $58.50 per barrel, while West Texas Intermediate futures dropped nearly 5% to $55.53 per barrel at a point, both at their lowest levels since February 2021.
On Saturday, eight OPEC+ members agreed to raise output by 411,000 barrels per day (bpd) next month, extending the group’s ongoing plan to unwind production cuts that began in April. The cumulative increase will reach 957,000 bpd in June, further weighing on prices already pressured by deteriorating global trade conditions.
The group, which accounts for around 40% of global oil supply, has jointly reduced production by approximately 2.2 million bpd in 2023. The quicker-than-expected phased rollback began with a 135,000 bpd increase in April, tripling to 411,000 bpd in May. The acceleration is seen as a punitive measure against members which failed to comply with agreed production quotas, with Kazakhstan and Iraq identified as recent overproducers.
“The gradual increases may be paused or reversed subject to evolving market conditions. This flexibility will allow the group to continue to support oil market stability,” OPEC+ said in a statement on Saturday. “The eight OPEC+ countries also noted that this measure will provide an opportunity for the participating countries to accelerate their compensation.”
The group’s next meeting is scheduled for 1 June.
A demand-driven market
Crude prices have been sliding throughout the year, now down over 20% since mid-January. The decline has been driven in part by US President Donald Trump’s pro-drilling stance, the escalating global trade war, and rising US-China tensions. The downtrend intensified after Trump announced sweeping reciprocal tariffs in early April. OPEC+’s increased output has added to bearish sentiment in fossil fuel markets.
Analysts now view crude as primarily a demand-driven market. “The outlook is more demand driven at the moment because the Saudis have effectively taken their hands off the wheel when it comes to supply,” Kyle Rodda, senior market analyst at Capital.com Australia, said. “Now that it’s gone and OPEC+ is going to crank up production, any rebound in prices will be down to an improvement in growth conditions — which in the immediate future is all tied to US trade policy.”
Crude prices fell more than 7% last week—the largest weekly decline in a month—due to weakening demand outlooks amid the ongoing US-China trade war. Recent economic data from the world’s two largest economies have highlighted worsening conditions due to the impact of high tariffs. The US economy contracted in the first quarter, while labour market indicators pointed to a slowdown. In China, the world’s largest oil importer, manufacturing activity fell to its lowest level in 16 months.
Oil traders are now closely watching the development of trade relations between Washington and Beijing. During an interview with NBC on Sunday, Trump indicated he may lower tariffs on China “at some point”, stating: “Because otherwise, you could never do business with them, and they want to do business very much.”
On Friday, China said it was assessing the potential for trade negotiations with the US. “The US has recently sent messages to China through relevant parties, hoping to start talks with China,” the Ministry of Commerce said. “China is currently evaluating this.”
