Oil Falls Over $2 a Barrel as OPEC+ Speeds Up Production Increases

SINGAPORE: Oil prices dropped over $2 a barrel during early Asian trading on Monday as OPEC+ plans to accelerate oil production increases, raising worries about additional supply. Brent crude futures fell by $2.04 a barrel, or 3.33 per cent, to reach $59.25 a barrel by 2240 GMT, while U.S. West Texas Intermediate crude stood at $56.19 a barrel, declining by $2.10, or 3.60 per cent. Both contracts hit their lowest point since April 9 at Monday's opening after OPEC+ decided to speed up oil production increases for the second month in a row, boosting output in June by 411,000 barrels per day (bpd).

The rise in June from the eight will bring the total collective increases for April, May, and June to 960,000 bpd, indicating a 44 per cent reversal of the 2.2 million bpd in various reductions established since 2022, as per calculations by Reuters. "The OPEC+ decision on May 3 to increase production quotas by an additional 411,000 bpd for June contributes to market anticipations that the global supply/demand balance is shifting towards a surplus," noted Tim Evans, founder of Evans on Energy. According to OPEC+ sources speaking to Reuters, the group might completely reverse its voluntary reductions by the end of October if members fail to enhance adherence to their production targets.

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Sources from OPEC+ have indicated that Saudi Arabia is urging OPEC+ to hasten the reversal of previous output reductions to penalise Iraq and Kazakhstan for their inadequate adherence to production quotas. Analyst Amarpreet Singh noted that Barclays has reduced its Brent predictions by $4 to $66 a barrel for 2025 and by $2 to $60 a barrel for 2026 due to the expedited phase-out by OPEC+. At the same time, tensions escalated in the Middle East following Israeli Prime Minister Benjamin Netanyahu's promise to respond to Iran after the Tehran-supported Houthi group launched a missile that struck close to Israel's primary airport. Iran's Defence Minister Aziz Nasirzadeh stated on Sunday that Tehran would retaliate if either the United States or Israel launched an attack.