Oil Prices Plunge 3.33% as OPEC+ Boosts Production by 411,000 Barrels

On Monday, during the Asian morning session, international oil prices experienced a significant drop of over $2 per barrel. This decline was primarily driven by OPEC+'s decision to accelerate its production increases, which heightened market concerns about a potential oversupply.

By 10:40 PM greenwich Mean Time, Brent crude oil futures had fallen by $2.04 per barrel, or 3.33%, to $59.25 per barrel. Similarly, wti crude oil futures dropped by $2.10 per barrel, or 3.60%, to $56.19 per barrel. This sharp decline was a direct response to OPEC+'s announcement to increase production by 411,000 barrels per day in June, significantly higher than the previously planned monthly increase of 137,000 barrels per day.

This decision was made during a meeting that was unexpectedly moved up to Saturday, ahead of its originally scheduled date on Monday. The market's reaction to these developments was swift and severe, with oil prices opening sharply lower on Monday, May 5, and briefly falling by more than 5% to reach a low of $55.30 per barrel, the lowest level since April 9.

The anticipation of increased supply from OPEC+ members, including Saudi Arabia and Russia, along with other non-OPEC countries, contributed to the downward pressure on oil prices. The market's focus on supply-side factors overshadowed any potential demand concerns, leading to a significant sell-off in oil futures.

OPEC+'s decision to accelerate production increases was driven by a desire to restore market balance and to address the issue of member countries exceeding their production quotas. However, the market's reaction highlighted the delicate nature of the oil market, where even small changes in supply can have significant impacts on prices. The rapid increase in production by OPEC+ members, coupled with the potential for additional supply from non-OPEC countries, created a scenario where the market was oversupplied, leading to a sharp decline in oil prices.

Energy analysts noted that OPEC+'s decision to increase production by 411,000 barrels per day in June, along with the additional 600,000 barrels per day from other countries, would result in a cumulative increase of 960,000 barrels per day over April, May, and June. This represents 44% of the 2.2 million barrels per day reduction that OPEC+ had committed to since 2022.

Industry experts also pointed out that if member countries do not strictly adhere to their production quotas, the voluntary reduction agreement could be completely lifted by the end of October. This potential for further increases in supply added to the market's concerns about an oversupply, contributing to the downward pressure on oil prices.

Analysts from a major international bank suggested that due to OPEC+'s accelerated reduction of production cuts, the forecast for Brent crude oil prices in 2025 has been lowered by $4 to $66 per barrel, and the forecast for 2026 has been lowered by $2 to $60 per barrel. This revision reflects the market's expectation of a more balanced supply and demand situation in the coming years, as OPEC+ continues to adjust its production levels in response to changing market conditions.