Oil, which was already down over 4% on U.S. President Donald Trump’s announcement of tariffs on trading partners, extended declines after OPEC updated its plans in a statement, with Brent crude dropping over 6% to below $70 a barrel.
Eight members of OPEC+, which includes the Organization of the Petroleum Exporting Countries and allies led by Russia, had been scheduled to raise output by 135,000 barrels per day in May as part of a plan to gradually unwind their most recent layer of output cuts.
But after a meeting of the eight countries held online on Thursday, the group announced it would boost output by 411,000 bpd in May. OPEC cited “continuing healthy market fundamentals and the positive market outlook.”
“This comprises the increment originally planned for May in addition to two monthly increments,” OPEC said in a statement referring to the volume. “The gradual increases may be paused or reversed subject to evolving market conditions.”
The increase will reduce fears arising from any disruption to Iranain supply as Trump restores maximum pressure on Tehran, also an OPEC member. The U.S. President, who has called on OPEC to lower prices since starting his second term, may visit Saudi Arabia as soon as next month. The May hike is the next increment of a plan agreed by Russia, Saudi Arabia, UAE, Kuwait, Iraq, Algeria, Kazakhstan and Oman to gradually unwind their most recent output cut of 2.2 million bpd, which came into effect this month. OPEC+ also has 3.65 million bpd of other output cuts in place until the end of next year to support the market. The total of 5.85 million bpd is equal to about 5.7% of global supply.
FOCUS ON COMPLIANCE
The decision on Thursday partly reflects OPEC+ leaders’ wish to improve compliance with production quotas, analysts said.
“OPEC+ focus is on compliance and this decision forces the laggards to step up compliance,” said Amrita Sen, co-founder of Energy Aspects.
Record output in Kazakhstan has angered several other members of the group, including top producer Saudi Arabia, sources have told Reuters. OPEC+ is urging the Central Asian country, among other members, to make further cuts to compensate for excess production.
Kazakhstan has been producing oil well above the targets agreed with OPEC+ in recent months. OPEC data also shows some other OPEC+ nations such as the United Arab Emirates, Nigeria and Gabon pumping above their quotas, but by far smaller amounts.
Production in Kazakhstan could drop this month and exports could decline after Russia ordered to shut some export capacity on the CPC pipeline, the main evacuation route for oil in Kazakhstan produced by oil majors such as U.S. Chevron and Exxon Mobil.
The eight OPEC+ countries will meet on May 5 to decide on June output, OPEC’s statement said.
