Oil prices slump as Opec+ announces surprise output increase

Brent, the international benchmark, declined nearly 6 per cent after the announcement

Attendees at the Cop29 climate change conference in Baku, Azerbaijan, walk past an installation depicting a barrel of oil with the Opec logo. Reuters

The Opec+ alliance of oil-producing countries has agreed to a larger-than-expected supply increase in May, resulting in oil prices plunging by nearly 6 per cent in evening trading.

The group, which includes Saudi Arabia and Russia, will add 411,000 barrels per day to the market next month, Opec said in a statement on Thursday.

“In view of the continuing healthy market fundamentals and the positive market outlook … the eight participating countries will implement a production adjustment of 411,000 bpd, equivalent to three monthly increments, in May 2025,” the group said.

The decision, which followed a ministerial meeting earlier in the day, exacerbated the slump in crude prices triggered by US President Donald Trump’s announcement of historic tariffs, which have placed the spotlight on the oil demand outlook.

Brent, the benchmark for two thirds of the world’s oil, was down 7.20 per cent at $69.55 a barrel at 7.20pm UAE time on Thursday. West Texas Intermediate, the gauge that tracks US crude, was 7.88 per cent lower at $66.06 a barrel.

Last month, Opec+ said it would proceed with a "gradual and flexible" unwinding of voluntary production cuts of 2.2 million bpd starting in April, adding 138,000 bpd per month until September 2026.

The planned return of production cuts – originally made by eight Opec+ members, including Saudi Arabia, Russia, the UAE and Iraq, in November 2023 – had been pushed back several times amid concerns about growing supply in the market.

"The gradual increases may be paused or reversed subject to evolving market conditions," Opec said. "This flexibility will allow the group to continue to support oil market stability."

The eight Opec+ countries noted that the supply boost will provide an opportunity for the participating countries to accelerate their compensation, the statement said.

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Last month, the alliance released a new schedule for seven member nations to make further oil output cuts to compensate for exceeding their quotas. The plan includes monthly cuts ranging from 189,000 bpd to 435,000 bpd, with the reductions scheduled to last until June 2026.

"There is some confidence within the group that the market can absorb additional barrels in a period where demand seasonally rises, but also that the supply increase would be smaller due to compensation cuts as well other supply disruptions," said Giovanni Staunovo, strategist at UBS.

"Also, warmer weather in the Middle East is seasonally rising, with more crude domestically needed," Mr Staunovo told The National.

Opec+'s latest decision follows Mr Trump's announcement of sweeping tariff measures on US trading partners on Wednesday, prompting world leaders to consider retaliatory steps and raising the risk of trade wars that could hinder global economic growth.

The minimum 10 per cent tariffs on all imports were established through an executive order, with Mr Trump saying the action will be imposed on “friend and foe alike” because, “in many cases, the friend is worse than the foe in terms of trade”.