Crude oil prices were poised for their first weekly decline in three weeks as the Organization of the Petroleum Exporting Countries and its allies (OPEC+) deliberated another substantial increase in production quotas.
This potential surge in supply comes at a time when the market is already anticipating a surplus, further pressuring prices downward.
International benchmark Brent crude slipped towards $64 a barrel, marking its fourth consecutive session of declines and pushing its weekly loss to approximately 2%.
West Texas Intermediate (WTI), the US benchmark, traded below $61 a barrel.
The downward pressure was intensified by reports that OPEC+ nations were discussing another major output-quota increase, potentially adding 411,000 barrels a day for July.
While delegates indicated that no final agreement has been reached, the mere prospect of additional barrels entering the market weighed heavily on sentiment.
Adding to the bearish narrative, recent data revealed another rise in US commercial oil stockpiles, reinforcing concerns about a growing supply glut.
This has been a persistent theme for crude oil, which has shed about 14% of its value this year, even hitting its lowest point since 2021 last month.
This decline has been largely attributed to OPEC+ loosening its supply curbs at a quicker-than-anticipated pace, a move that coincided with the US-led trade war creating significant headwinds for global energy demand.
OPEC+ at a crossroads: prices vs. market share
Market participants are now keenly focused on the upcoming OPEC+ decision regarding July output levels.
“Focus is increasingly turning to OPEC+ and what the group decides to do with July output levels,” commented Warren Patterson, head of commodities strategy for ING Groep NV, as quoted by Bloomberg.
He suggested that the outcome of this meeting could signal a pivotal shift in the group’s strategy:
Another large increase for July would cement a shift in policy — from defending prices to defending market share.
A group of eight key OPEC+ nations, including the de facto leader Saudi Arabia, is scheduled to hold a virtual meeting on June 1 to finalize July’s production levels.
A recent Bloomberg survey of traders and analysts indicated that a majority expect the group to approve an output quota surge, further underscoring the prevailing market anticipation.
Geopolitical undercurrents: Russian oil cap and US fiscal woes
Beyond the immediate OPEC+ deliberations, other geopolitical and macroeconomic factors are influencing the oil market.
European Commission’s economy chief, Valdis Dombrovskis, stated that it would be “appropriate to lower the price cap on Russian oil to $50 a barrel.”
He argued that the current $60 cap—a measure designed to penalize Moscow for its war against Ukraine while ensuring continued oil flow—is not effectively hurting Russia at current lower price levels.
Meanwhile, broader market sentiment was also affected by concerns surrounding the United States’ fiscal health.
The US dollar was weaker on Friday, on track for its first weekly drop in five weeks against both the euro and the yen, as investors sought safe-haven assets.
Following Moody’s downgrade of US debt ratings last week, investor attention has sharpened on the country’s substantial $36 trillion debt pile.
This concern is further amplified by US President Donald Trump’s proposed tax bill, which could add trillions more to the national debt, creating a cautious atmosphere across financial markets that inevitably spills over into commodities like oil.
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