Oil Prices Plunge Below $60 as OPEC+ Accelerates Output Hikes, Surplus Concerns Grow

Market Reacts to Increased Production Plans

Oil prices experienced a significant drop in Asian trading on Monday, falling more than $2 per barrel following OPEC+’s decision to further accelerate oil output increases. This move has raised concerns about potential oversupply in a market already facing demand uncertainty.

Brent crude futures dropped $2.21 (3.61%) to $59.08 per barrel, while U.S. West Texas Intermediate crude fell $2.29 (3.93%) to $56.00 per barrel. Both benchmarks reached their lowest levels since April 9 immediately after markets opened.

OPEC+ Production Increases

The Organization of the Petroleum Exporting Countries and allies (OPEC+) agreed to raise production by 411,000 barrels per day (bpd) in June, marking the second consecutive month of accelerated output hikes. This brings the total combined increases for April, May, and June to 960,000 bpd – representing a 44% reversal of the 2.2 million bpd cuts implemented since 2022.

According to industry sources, OPEC+ could fully unwind its voluntary cuts by October 2025 if member countries don’t improve compliance with their production quotas. Reports suggest Saudi Arabia is pushing for faster unwinding to penalize Iraq and Kazakhstan for their poor compliance records.

Market Reactions and Analyst Forecasts

The Brent 6-month price spread flipped to contango (11 cents per barrel) for the first time since December 2023, indicating market expectations of ample supply with current prices lower than future months.

Major financial institutions have revised their oil price forecasts downward:

• Barclays reduced its 2025 Brent forecast by $4 to $66/barrel and 2026 forecast by $2 to $60/barrel
• ING lowered its 2025 Brent average projection from $70 to $65/barrel

Supply-Demand Balance Shifts

“We now expect OPEC+ to phase out the additional voluntary adjustments by October 2025 but also expect slightly slower U.S. oil output growth,” said Barclays analyst Amarpreet Singh. The bank estimates these changes will increase 2025 supply by 290,000 bpd and 2026 supply by 110,000 bpd.

ING analysts, led by Warren Patterson, noted: “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 predict the global oil balance will move deeper into surplus throughout 2025.

For more details, read the original article at BusinessDay.