Oil tumbles as OPEC+ accelerates output hikes, surplus looms

Oil prices fell more than $1 a barrel on Monday as OPEC+ is set to further speed up oil output hikes, spurring concerns about more supply coming into a market clouded by an uncertain demand outlook, Reuters reported.

Brent crude futures dropped $1.34, or 2.19%, to $59.95 a barrel by 0717 GMT while U.S. West Texas Intermediate crude was at $56.87 a barrel, down $1.42, or 2.44%.

Both contracts touched their lowest since April 9 at Monday’s open after OPEC+ agreed to accelerate oil production hikes for a second consecutive month, raising output in June by 411,000 barrels per day (bpd).

The June increase from the eight producers in the OPEC+ group will take the total combined hikes for April, May and June to 960,000 bpd, representing a 44% unwinding of the 2.2 million bpd of various cuts agreed on since 2022, according to Reuters calculations.

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

The group could fully unwind its voluntary cuts by the end of October if members do not improve compliance with their production quotas, OPEC+ sources told Reuters.

The premium between the front-month Brent contract and that for delivery in six months was 4 cents a barrel, narrowing from 47 cents in the previous session.

However, the spread flipped to a discount, known as a contango structure, of 11 cents a barrel earlier on Monday, for the first time since December 2023, reflecting expectations that the later-dated market is amply supplied or demand may drop.

Barclays and ING have also lowered their Brent crude forecasts following the OPEC+ decision.

Barclays reduced its Brent forecast by $4 to $66 a barrel for 2025 and by $2 to $60 for 2026, while ING expects Brent to average $65 this year, down from $70 previously.

“We now expect OPEC+ to phase out the additional voluntary adjustments by October 2025 but also expect slightly slower U.S. oil output growth,” Barclays analyst Amarpreet Singh said in a note.

The net impact of the higher OPEC+ output and lower U.S. output has increased Barclays’ estimate of supply in 2025 by 290,000 bpd for 2025 and 110,000 bpd for 2026, he said.

ING analysts led by Warren Patterson said the global oil balance is expected to move deeper into surplus throughout 2025.

“The oil market has been dealing with significant demand uncertainty amid tariff risks. This change in OPEC+ policy adds to uncertainty on the supply side,” they added.

Meanwhile, tensions flared in the Middle East after Israeli Prime Minister Benjamin Netanyahu vowed to retaliate against Iran for the Tehran-backed Houthi group firing a missile that landed near Israel’s main airport.

Iran’s Defence Minister Aziz Nasirzadeh said on Sunday that Tehran would strike back if the United States or Israel attacked.