This Monday, international oil prices continued their downward trend as OPEC+ announced an accelerated production increase, heightening concerns about a global crude oil surplus. With demand prospects still weak, investors have become more cautious about the future trajectory of the oil market, and market sentiment is under significant pressure.
Brent crude futures fell 1.7% on the day, closing at $60.23 per barrel, while U.S. WTI crude futures dropped even more, falling 2% to $57.13 per barrel. Both benchmarks marked their lowest closing prices since early 2021. Notably, Brent crude fell 8.3% just last week, with WTI seeing a 7.5% decline. Saudi Arabia had previously indicated its ability to cope with a long-term low oil price environment, further impacting the market.
OPEC+ announced last Saturday that it would accelerate production increases for the second consecutive month, adding 411,000 barrels per day in June. According to the latest data, the organization will collectively increase production by 960,000 barrels per day from April to June. Reuters calculated that this equals a reduction of 44% from the 2.2 million barrels per day cut agreed upon over several rounds since 2022.
Ole Hansen from Saxo Bank noted that while there was initial optimism about potential tariff negotiations between China and the U.S., OPEC+'s move to increase production significantly offset those expectations, driving oil prices down further.
Third Bridge analyst Peter McNally emphasized that currently, non-OPEC+ countries account for nearly 60% of global oil supply. If OPEC+ continues to ease supply controls and oil prices keep falling, non-OPEC+ oil-producing countries may find their market expansion opportunities limited.
There are also internal disagreements within OPEC+. According to sources cited by Reuters, if member countries fail to effectively adhere to their production quotas, the organization may completely abandon the voluntary production cut agreements by the end of October. Saudi Arabia is seen as a key force driving this policy shift, with one motivation being to penalize countries like Iraq and Kazakhstan, which have long failed to meet their quota obligations.
Hansen from Saxo Bank further pointed out: "Saudi Arabia's push for increased production aims both at challenging the market share of U.S. shale producers and penalizing OPEC+ members that have not adhered to quotas but have benefitted from high oil prices."
The market reacted swiftly, with multiple institutions downgrading their oil price forecasts. ING reduced its average price expectation for Brent crude this year from $70 to $65, while Barclays lowered its 2025 average price prediction by $4 to $66 per barrel, and adjusted its 2026 forecast down to $60 per barrel.
With increasing supply pressure and an uncertain global economic outlook, the oil market is facing a new wave of volatility, and investors need to be wary of further market fluctuations.
