Oil dropped after OPEC+ agreed to another large output increase, raising concern that additional supply could lead to a global glut just as the trade war threatens demand.
West Texas Intermediate futures fell 2% to settle just above $57 a barrel, a fresh four-year low for the closing price, amid thinner trading due to a UK holiday. OPEC and its allies agreed on Saturday to continue loosening supply constraints as the group’s leaders seek to punish overproducing members and win back market share.
The latest hike of more than 400,000 barrels a day starting in June matched a similar increase announced last month, 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 unwinding prolonged output curbs that were meant to support prices but which also cost the group market share.
The strategy shift has already collapsed spreads at the front end of the futures curve and forced Wall Street observers to shave price forecasts.
“Oil market analysts did not expect the eight OPEC+ countries to accelerate the return of oil volumes for a second consecutive month — especially amid such economic uncertainty,” said Rob Thummel, senior portfolio manager at Tortoise Capital. His firm predicts that global oil markets will be oversupplied by as much as 500,000 barrels a day starting in June, which could push prices to the low $50s.
In a move that could put additional pressure on prices, Saudi Arabia signaled further similar-sized output increases could follow, according to delegates. The threat was widely viewed as being aimed at producers like Kazakhstan and Iraq that have pumped beyond their limits.
In the background, US President Donald Trump’s tariff war threatens to derail growth, erode investor confidence and undercut energy demand. The dramatic policy pivot by OPEC+ has added momentum to crude’s sustained selloff, which has made oil one of the worst-performing major commodities of 2025.
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. Trump — who is scheduled to travel to the Middle East later this month — 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.
On the trade war front, Trump said he was willing to lower tariffs on China at some point because the levies now are so high that the world’s two largest economies have essentially stopped doing business with each other. However, he said he had no plans to speak with his Chinese counterpart this week.
Source: by Mia Gindis, Anthony Di Paola for Bloomberg