Shortly after trading commenced, U.S. crude oil futures declined by $2.49, or 4.27%, to settle at $55.80 per barrel. The global benchmark, Brent crude, also saw a substantial decrease, falling by $2.39, or 3.9%, to $58.90 per barrel. This latest dip contributes to a broader trend, with oil prices having already fallen by more than 20% since the beginning of the year.
The decision by the eight key producers within OPEC+, spearheaded by Saudi Arabia, to raise output by an additional 411,000 barrels per day (bpd) in June follows a similar surprise move in May, where the group agreed to increase production by the same volume. This cumulative increase of over 800,000 bpd entering the market within a two-month span has significantly outpaced initial expectations. For instance, Goldman Sachs had previously forecasted a much smaller increase of 140,000 bpd for June.
The downward pressure on oil prices intensified in April, which marked the largest monthly loss since 2021. This decline coincided with escalating concerns about a potential economic slowdown, fueled in part by U.S. President Donald Trump's imposition of tariffs. These tariffs have raised fears of a looming recession, which would invariably dampen global demand for oil, just as OPEC+ is aggressively increasing supply.
The current weak price environment is also anticipated to have repercussions on investment within the oil and gas sector. Lorenzo Simonelli, CEO of Baker Hughes, highlighted this concern during the company's first-quarter earnings call on April 25th, stating that "The prospects of an oversupplied oil market, rising tariffs, uncertainty in Mexico and activity weakness in Saudi Arabia are collectively constraining international upstream spending levels."
This sentiment was echoed in the recent earnings reports of major oil companies Chevron and ExxonMobil. Both companies reported lower first-quarter earnings compared to the same period in 2024, primarily attributing the decline to the prevailing lower oil prices.
Looking ahead, Goldman Sachs has projected that U.S. crude and Brent prices will average $59 and $63 per barrel, respectively, for the remainder of the year. However, the recent surge in OPEC+ production and the growing anxieties surrounding global economic growth could potentially lead to a revision of these forecasts if downward pressure on prices persists. The market will be closely watching future economic indicators and OPEC+ decisions to gauge the trajectory of oil prices in the coming months.