Oil Poised for Weekly Decline as OPEC+ Considers Major Supply Increase

Brent and WTI Slip Amid Prospects of Elevated Production

Oil prices are headed for their first weekly drop in three weeks, with Brent crude slipping toward $64 per barrel, marking a fourth consecutive session of decline and a weekly loss of roughly 2%. Meanwhile, West Texas Intermediate (WTI) fell below $61 per barrel, pressured by growing expectations of increased supply from OPEC+.

Delegates revealed that OPEC and its allies are deliberating a significant production quota hike of 411,000 barrels per day for July, although no formal decision has been reached yet. This potential increase comes amid an already oversupplied market facing sluggish demand due to ongoing US-led trade tensions.

Highlights:

• Brent crude down about 2% for the week, approaching $64/barrel.

• WTI prices dip below $61/barrel, continuing a four-session decline.

• OPEC+ considering a 411,000 bpd supply increase for July, no agreement finalized.

Market Impact of Supply Growth Amid Weak Demand Signals

Oil prices have fallen approximately 14% year-to-date, hitting lows unseen since 2021, as OPEC+ has eased supply restrictions more aggressively than anticipated. This accelerated loosening coincides with dampening demand prospects amid geopolitical headwinds, notably the ongoing US-China trade tensions that are weighing on global economic growth.

US commercial oil inventories rose again this week, further stoking concerns about an oversupplied market and excess stockpiles, which continue to pressure crude benchmarks downward.

Warren Patterson, Head of Commodities Strategy at ING Groep NV, emphasized that market focus has shifted toward OPEC+’s upcoming decisions. He noted, “Another large increase for July would cement a shift in policy — from defending prices to defending market share,” signaling a strategic pivot by the producer cartel in response to shifting market dynamics.

Highlights:

• Crude oil prices down ~14% YTD, near 2021 lows.

• Rising US commercial stockpiles exacerbate supply glut concerns.

• OPEC+ strategy potentially shifting from price support to market share defense.

OPEC+ June Meeting and European Price Cap Considerations

A virtual meeting of eight key OPEC+ members, including de facto leader Saudi Arabia, is scheduled for June 1 to finalize July production targets. Market surveys conducted by Bloomberg indicate a consensus expectation for a substantial output increase.

In related developments, European Commission Economy Chief Valdis Dombrovskis suggested lowering the existing $60 per barrel price cap on Russian oil to $50, aiming to increase pressure on Moscow amid its ongoing conflict with Ukraine. Currently, the $60 cap has had limited impact given the recent downward pressure on prices, making the proposed adjustment a potentially stronger economic sanction.

Highlights:

• OPEC+ meeting on June 1 expected to confirm July output increase.

• European Union proposes reducing Russian oil price cap from $60 to $50/barrel.

• Current price cap deemed insufficient due to falling market prices.