Why oil prices can plunge further after OPEC+ signals another supply increase

Dubai: Oil prices may continue to face downward pressure in the near term after OPEC+ confirmed another production increase for June. The decision, announced over the weekend, will see the group raise output by 411,000 barrels a day — matching last month’s unexpected hike and reinforcing a noticeable shift in strategy by the alliance.

Led by Saudi Arabia and Russia, OPEC+ has moved away from its previous focus on supporting prices through output restraint. Instead, it is now increasing supply even as global markets remain well-stocked and demand signals remain mixed. According to the group, the decision reflects “current healthy market fundamentals,” though some analysts view it as a response to overproduction by certain member states.

Brent crude hovered around $61 a barrel, while West Texas Intermediate remained below $60 — both near multi-year lows. Crude prices have dropped by nearly 20% since the start of the year, weighed down by broader economic uncertainty, softer-than-expected demand from China, and strong non-OPEC+ supply, particularly from the U.S.

The production increase comes at a time when oil traders were already expecting further supply-side developments. Reports earlier in the week had pointed to internal discussions within OPEC+ about rebalancing compliance across member countries. Iraq and Kazakhstan, in particular, have been producing above agreed quotas, which has created friction within the alliance.

Market watchers say that the extra supply could increase global inventories over the coming months. Analysts at TD Cowen estimate a potential build of up to 200 million barrels over the next three quarters, which may weigh on prices further — possibly toward the low $50s if current trends persist.

The shift in OPEC+ policy has also drawn attention because it comes amid wider geopolitical dynamics. The decision aligns with growing international interest in lower energy costs, particularly in the U.S., where fuel prices remain a key economic and political issue. However, any long-term benefit for consumers may come with trade-offs for oil-dependent economies that rely on higher prices to fund public spending.

In Saudi Arabia, for instance, analysts estimate the fiscal break-even oil price to be above $90 per barrel. Lower revenues have already led to reduced spending on large-scale projects, and the International Monetary Fund recently downgraded its outlook for the region.

Meanwhile, in the U.S., some shale producers have started to adjust to the softer price environment. Companies like Chevron have indicated they will slow capital spending and reduce share buybacks due to market conditions.

The next OPEC+ meeting is scheduled for June 1, when members are expected to decide on production levels for July. Until then, oil markets may remain reactive to supply signals and broader macroeconomic trends, including trade relations between the U.S. and China and ongoing geopolitical developments in the Middle East.