Oil Prices Plunge 2.51% Amid OPEC+ Production Concerns

International oil prices experienced a significant downturn on Tuesday, with both Brent crude and WTI crude falling by more than 2.5%, marking their lowest closing prices in two weeks. This decline was driven by a combination of factors, including expectations that the Organization of the Petroleum Exporting Countries and its allies (OPEC+) may increase production for the second consecutive month, concerns over the potential economic impact of U.S. tariffs, and rising U.S. crude oil inventories.

Brent crude closed at $64.21 per barrel, down $1.65 or 2.51%. Meanwhile, U.S. WTI crude settled at $60.42 per barrel, down $1.63 or 2.63%. The economic fallout from the trade war between the U.S. and China, the world's two largest oil consumers, has already led to a significant reduction in bilateral trade flows, effectively creating a "semi-embargo" situation. This has raised concerns about the potential impact on global oil demand.

Bob Yawger, the head of energy futures at MUFG, warned that "each day the trade negotiations are delayed brings the global economy closer to the edge of a demand collapse." This sentiment was echoed by analysts who noted that the proposed increase in production by OPEC+ members, particularly in June, comes at a time when market demand is already fragile. The increase in Kazakhstan's first-quarter oil exports, which rose by 7% year-on-year, further highlights the weakening enforcement of production cuts within the OPEC+ alliance.

Ole Hansen, an analyst at Saxo Bank, described the timing of the OPEC+ production increase proposal as "the worst possible moment." The continuous rise in U.S. crude oil inventories has also added pressure on oil prices. Analysts predict that U.S. crude oil inventories will increase by 500,000 barrels for the fifth consecutive week. While this increase is lower than the 730,000 barrels seen in the same period last year, it remains higher than the average increase of 320,000 barrels observed between 2020 and 2024. The upcoming API and EIA inventory reports, scheduled for release on Tuesday evening and Wednesday, respectively, will be closely watched by the market for further insights.