Oil Prices Fall Sharply After OPEC+ Confirms Increase In Production In June

The group confirmed plans to increase production by 411,000 barrels per day (bpd) next month, the second consecutive month of similar hikes.

Industry insiders suggested that the latest acceleration is being driven, in part, by Saudi Arabia's push to penalise members such as Iraq and Kazakhstan over continued non-compliance with production quotas.

Source : Freepik

Crude oil prices experienced a sharp decline in early Asian trading hours on Monday, dropping more than $2 per barrel as concerns about growing global supply intensified. The downturn followed a key decision by the OPEC+ alliance to step up production hikes, sparking worries that the market could soon face an oversupply.

Close to midnight on Sunday, Brent crude fell by $2.04, or 3.33 per cent, reaching $59.25 per barrel. US West Texas Intermediate (WTI) crude mirrored the trend, shedding $2.10, or 3.60 per cent, to settle at $56.19 per barrel.

Both benchmarks opened at their weakest levels since April 9, reflecting investor reaction to the OPEC+ move to raise output again in June, reported Reuters.

The group confirmed plans to increase production by 411,000 barrels per day (bpd) next month—the second consecutive month of similar hikes. With April and May already accounting for previous hikes, the total addition across the three months will amount to 960,000 bpd. According to Reuters calculations, this marks a 44 per cent rollback of the 2.2 million bpd in production cuts that had been in place since 2022.

Compliance Concerns and Geopolitical Risks Add to Market Jitters

Industry insiders suggested that the latest acceleration is being driven, in part, by Saudi Arabia's push to penalise members such as Iraq and Kazakhstan over continued non-compliance with production quotas.

OPEC+ sources told Reuters the group might eliminate all voluntary cuts by the end of October unless compliance improves.

"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," said Tim Evans, founder of Evans on Energy, in a note.

The ripple effect has reached market forecasts as well. Analyst Amarpreet Singh of Barclays stated that the bank has revised its Brent crude projections downward, cutting the 2025 estimate by $4 to $66 per barrel and lowering the 2026 forecast by $2 to $60.

While supply-side pressures dominate headlines, tensions in the Middle East continue to cast a shadow over oil markets. Over the weekend, Israeli Prime Minister Benjamin Netanyahu pledged retaliation against Iran after a missile fired by the Tehran-backed Houthi group landed near Israel’s main airport. In response, Iran’s Defence Minister Aziz Nasirzadeh warned on Sunday that Tehran would retaliate if the US or Israel launched an attack.