Oil sinks as Opec+ supply surge threatens to swamp global market
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Opec and its allies agreed to another bumper output increase, adding to supply at a time when demand is challenged by the drag from the global trade war.
PHOTO: REUTERS
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Singapore – Crude oil prices buckled on concerns of a global glut after Opec+ agreed to another bumper output increase, adding to supply at a time when demand is challenged by the drag from US President Donald Trump’s global trade war.
Global benchmark Brent tumbled by as much as 4.6 per cent towards US$58 a barrel as the week’s trading kicked off, while West Texas Intermediate was near US$56.
The decision by Organisation of the Petroleum Exporting Countries and its allies was taken at a meeting on May 3, with the group’s leaders seeking to punish overproducing members, including Kazakhstan, in a strategy shift that had already sent crude prices plunging.
The latest hike of more than 400,000 barrels a day from June matched a similar increase announced in April, when the group made the shock decision to bring back triple the planned volume for May.
The alliance – led by Saudi Arabia and Russia – has been reversing prolonged output curbs that were meant to support prices, but which cost Opec+ market share to rival drillers.
After the meeting, Saudi Arabia signalled further similar-sized increases could follow, according to delegates.
Crude has slumped in 2025, touching a four-year low, as Mr Trump’s trade war threatened to derail growth, erode investor confidence and undercut energy demand.
The dramatic policy pivot by Opec+ has added momentum to the sustained sell-off, which has made oil one of the worst performing major commodities of 2025.
The increase from Opec+ “simply cannot be absorbed”, said Mr Ajay Parmar, director of oil analytics at ICIS.
“Demand growth is weak, particularly with the recent imposition of tariffs,” he said, flagging the “inevitability” of weaker Brent prices.
The move by Opec+ stoked bumper trading volumes. Time spreads, meanwhile, have also collapsed. The September to October Brent spread fell into contango – when later prices trade at a premium to earlier ones – from its opposite, backwardated structure on May 2, signalling an impending glut.
Morgan Stanley reduced price forecasts following the Opec+ move, predicting US$62.50 a barrel for Brent in the third and fourth quarters of 2025, US$5 lower than previously seen, analysts including Mr Martijn Rats said in a note. Goldman Sachs analysts led by Mr Daan Struyven also cut their forecasts.
The decline in energy costs – if sustained – may be welcomed by central bankers, including those at the Federal Reserve, who meet this week to assess policy. Cheaper oil and associated products, including diesel and petrol, could offset some of the inflationary impact expected to be driven by tariffs.
Mr Trump – who is scheduled to travel to the Middle East later in May – had called on Opec+ to bolster production and help bring down energy prices.
At the same time, Saudi Arabia has been seeking to strengthen ties with Washington, which has also been holding talks on a nuclear pact with Riyadh’s political foe and fellow Opec member Iran. BLOOMBERG
