In a surprising turn of events, the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, announced on Thursday that they would increase oil output by 411,000 barrels per day (bpd) in May.
The announcement led to an immediate reaction in oil prices. Brent futures plummeted by 6.42% to 70.14 per barrel, while West Texas Intermediate (WTI) fell by 6.6466.95 per barrel. Both benchmarks continued their downward trajectory during Friday’s Asian trading session, nearing levels not seen since December 2021. Analysts attribute this sharp decline to concerns over potential oversupply amid already fragile demand conditions.
This unexpected production hike follows US President Donald Trump’s “Liberation Day” declaration, which introduced reciprocal tariffs—a development that has further unsettled investors. OPEC+ convened a virtual meeting involving key member nations such as Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman.
Erlan Akkenzhenov, Kazakhstan’s newly appointed energy minister, made his debut appearance at the Thursday meeting. His participation is significant given Kazakhstan’s recent struggles to meet its assigned quota due to overproduction. While no specific country was singled out in the official statement, OPEC emphasized that the additional output would allow participating nations to “accelerate their compensation” for past overproduction by implementing stricter adherence to agreed-upon cuts moving forward.
A Strategic Adjustment Amidst Uncertainty
Initially, OPEC+ had planned a modest increase of just 135,000 bpd in May as part of a phased approach to unwind their most recent round of output restrictions. However, the group decided to revise its strategy, citing “continuing healthy market fundamentals and the positive market outlook.” This adjustment reflects confidence in the resilience of global oil markets despite ongoing challenges.
The organization also underscored its commitment to flexibility, noting that any increases could be paused or reversed based on evolving market conditions. Such adaptability ensures that OPEC+ can continue to stabilize oil prices effectively. According to the statement, some member states have been required to curtail supplies to offset excess production relative to their targets, totaling approximately 4.2 million barrels per day. Countries like Kazakhstan, the United Arab Emirates, Nigeria, and Gabon have reportedly exceeded their quotas in recent months.
Looking ahead, the eight OPEC+ nations are scheduled to reconvene on May 5 to determine June’s production levels. Industry experts suggest that OPEC+ remains optimistic about the market recovering in the coming months. Nader Itayim, editorial manager at Argus Media, explained that many members are comfortable operating within the 70−75 per barrel range. He added that the coalition expects oil demand to rise during the summer months and anticipates resolution of the ongoing tariff wars, which could bolster economic activity and energy consumption.
OPEC+ appears determined to navigate uncertainties with caution and agility. By maintaining a flexible approach, the coalition aims to strike a delicate balance between supporting market stability and addressing the needs of its member nations. All eyes will be on the next OPEC+ meeting, which will be closely scrutinized by investors, energy analysts, and policymakers alike.
