Crude Oil Plunged on Concerns Over Rising Global Supply

Crude oil benchmarks experienced a fierce selloff on Monday to settle at over four-year lows, driven by concerns over rising global supply following an OPEC+ decision to accelerate output increases for a second month.

Both Brent and WTI crude oil benchmarks posted multi-week lows of $59/b and $55/b, respectively, after falling 2% on Monday morning, before recovering higher in the following hours.

Oil prices in April posted the biggest monthly loss since 2021, as U.S. President Trump’s higher tariffs have raised fears of a recession that would slow demand for oil at the same time that OPEC+ is quickly increasing supply.

Bearish sentiment for crude oil prices:

Investors turned bearish on crude oil prices following the news that the OPEC+ agreed on Saturday to further speed up oil production hikes for a second consecutive month, raising output in June by 411,000 barrels per day (bpd). (Source: economictimes.indiatimes.com)

The June increase by eight participants in the OPEC+ group, which includes allies such as Russia, will take the total combined hikes for April, May and June to 960,000 bpd. That represents a 44% unwinding of the 2.2 million bpd of various cuts agreed on since 2022, according to Reuters calculations (Source: reuters.com).

Hence, OPEC+ group could fully unwind its voluntary cuts by the end of October if members do not improve compliance with their production quotas.

Conclusion

Following the recent developments, both crude oil benchmarks have fallen to their lowest levels since 2020, down more than 18% in just four weeks, as the OPEC+ decision to expedite its output hikes stoked fears about rising global supply at a time when the demand outlook is uncertain due to recession fears and Trump’s tariff policies.