In a meeting abruptly moved up by 2 days, the Saudi Arabia-led OPEC+ alliance announced on Saturday, May 3, that it would raise its production quota, triggering a 411,000 b/d increase for June.
This marks the group’s third consecutive monthly hike, escalating concerns of a potential price war in the global oil market.
The move follows a similar surprise decision 1 month earlier, when OPEC+ agreed to boost May output by the same volume. Together with April’s increase, the group’s total supply target has now risen by 960,000 b/d.
The rapid pace of these supply increases comes at a fragile moment. Oil prices posted their steepest monthly decline since 2021 in April, weighed down by rising fears of a global economic slowdown. US President Trump’s imposition of higher tariffs has intensified recession concerns, compounding bearish sentiment as OPEC+ accelerates output.
According to investment banking firm Piper Sandler, the OPEC+ group’s nearly 5-year-long supply management strategy has now effectively come to an end. However, the firm believes that actual increases will be smaller, it said in a note.
"We believe that three of the eight "core" members of the OPEC+ group will not increase production as Russian output is falling and Kazakhstan and Iraq have peaked. The rest of the group are collectively increasing production by 94,000 b/d per month over the 18-month plan," the firm said.
Also commenting on the move, Daan Struyven, head of oil research, Goldman Sachs, said in a note that the bank's "key conviction remains that high spare capacity and high recession risk skew the risks to oil prices to the downside despite relatively tight spot fundamentals." The investment bank has reduced its projection for US crude prices this year by $3, bringing it down to $56/bbl.
