Opec+ unexpectedly speeds up oil output hikes, oil drops

Inayat-ur-Rahman, Business Editor / Reuters

Eight Opec+ countries unexpectedly agreed to advance their plan to phase out oil output cuts by increasing output by 411,000 barrels per day in May, a decision that prompted oil prices to extend earlier sharp losses.

Oil, which was already down over 4% on US President Donald Trump’s announcement of tariffs on trading partners, extended declines after Opec updated its plans in a statement, with Brent crude dropping over 6% to below $70 a barrel.

Joseph Dahrieh, Managing Principal at Tickmill told Gulf Today that crude oil futures have reversed their gains from early March, with prices falling after US President Trump’s tariff announcements, stoking concerns over potential global trade tensions and its impact on oil demand.

“This pullback reflects market uncertainty and could weigh on global crude prices in the near term, particularly if trade tensions hinder economic growth in key oil-consuming regions. The outlook suggests caution, with volatility likely to increase as markets digest the full implications of the tariffs. Longer-dated futures contracts also saw declines in prices, indicating expectations of long-term risks for crude prices.” Dahrieh added.

Meanwhile, Opec+’s decision to increase its oil output adds further bearish pressure. The organisation is aiming to supply up to 411,000 barrels per day in May, which is significantly higher than previously planned. The excess supply could add to the pressure on the oil market, in particular if demand is affected by the changes in US trade policy, leaving the market without support.” Dahrieh concluded.

Eight members of Opec+, which includes the organisation of the Petroleum Exporting Countries and allies led by Russia, had been scheduled to raise output by 135,000 barrels per day in May as part of a plan to gradually unwind their most recent layer of output cuts.

But after a meeting of the eight countries held online on Thursday, the group announced it would boost output by 411,000 bpd in May. Opec cited “continuing healthy market fundamentals and the positive market outlook.” “This comprises the increment originally planned for May in addition to two monthly increments,” Opec said in a statement referring to the volume. “The gradual increases may be paused or reversed subject to evolving market conditions.” The increase will reduce fears arising from any disruption to Iranian supply as Trump restores maximum pressure on Tehran, also an Opec member. The US President, who has called on Opec to lower prices since starting his second term, may visit Saudi Arabia as soon as next month.

The May hike is the next increment of a plan agreed by Russia, Saudi Arabia, UAE, Kuwait, Iraq, Algeria, Kazakhstan and Oman to gradually unwind their most recent output cut of 2.2 million bpd, which came into effect this month.

Opec+ also has 3.65 million bpd of other output cuts in place until the end of next year to support the market. The total of 5.85 million bpd is equal to about 5.7% of global supply.

The decision on Thursday partly reflects Opec+ leaders’ wish to improve compliance with production quotas, analysts said. “Opec+ focus is on compliance and this decision forces the laggards to step up compliance,” said Amrita Sen, co-founder of Energy Aspects.

Record output in Kazakhstan has angered several other members of the group, including top producer Saudi Arabia, sources have told Reuters. Opec+ is urging the Central Asian country, among other members, to make further cuts to compensate for excess production.

Kazakhstan has been producing oil well above the targets agreed with Opec+ in recent months.

Production in Kazakhstan could drop this month and exports could decline after Russia ordered to shut some export capacity on the CPC pipeline, the main evacuation route for oil in Kazakhstan produced by oil majors such as US Chevron and Exxon Mobil.

The eight Opec+ countries will meet on May 5 to decide on June output, Opec’s statement said.

Eight members of Opec+, which includes the organisation of the Petroleum Exporting Countries and allies led by Russia, had been scheduled to raise output by 135,000 barrels per day in May as part of a plan to gradually unwind their most recent layer of output cuts.