Oil Prices Sink After OPEC+ Agrees to Boost Production in June

While crude oil prices tumble, one market analyst says the situation may be ‘less bearish.’

The logo of the Organization of the Petroleum Exporting Countries (OPEC) sits outside its headquarters ahead of the OPEC and NON-OPEC meeting, in Austria, on Dec. 6, 2019. Leonhard Foeger/Reuters

U.S. crude oil prices fell by more than 1 percent on May 5, after eight major energy producers agreed over the weekend to accelerate production.

West Texas Intermediate (WTI), a U.S. benchmark for oil prices, tumbled by 1.5 percent to below $58 a barrel on the New York Mercantile Exchange. U.S. oil prices are down 20 percent this year.

Brent, the international benchmark for oil prices, erased about 1.3 percent to slide below $61 a barrel on London’s ICE Futures exchange. Year to date, Brent prices have slumped by more than 19 percent.

Allies of the Organization of Petroleum Exporting Countries, OPEC+, agreed on May 3 to bolster output by another 411,000 barrels per day (bpd) effective June. This is higher than the market’s consensus forecast of 140,000 bpd.

In a statement following the virtual meeting, officials said “current healthy market fundamentals” facilitated the decision to adjust output levels.

“The gradual increases may be paused or reversed subject to evolving market conditions,” OPEC stated. “This flexibility will allow the group to continue to support oil market stability. The eight OPEC+ countries also noted that this measure will provide an opportunity for the participating countries to accelerate their compensation.”

Last month, the eight OPEC+ members—Algeria, Iraq, Kazakhstan, Kuwait, Oman, Russia, Saudi Arabia, and the United Arab Emirates—announced they would increase production levels by the same amount.

Industry observers viewed the decision as a way to punish certain members for overproducing, which sharply lowered oil prices.

“Remember that Saudi Arabia was doing the heavy lifting—cutting an additional [1 million barrels per day] at some point—to help the group achieve its goals, while Kazakhstan and Iraq were often accused of not complying fully with their promises,” Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, said in a note emailed to The Epoch Times.

The group is managing production on a month-by-month basis, choosing July output levels at the June 1 meeting.

It is unclear how far the institution is willing to go, particularly as Saudi Arabia needs approximately $90 a barrel to balance the budget, according to Warren Patterson, the head of commodities strategy at ING.

“The key to knowing how far the Saudis will take what is starting to look like a price war is the nation’s tolerance for low oil prices over time,” Patterson said in a May 3 note.

“Saudi Arabia will be able to lower its fiscal breakeven level by pumping more. Obviously, this also depends on how much lower prices trade amid increased supply.”

Riyadh will need to either cut spending or borrow from the capital markets to manage the increasing gap between fiscal breakeven and lower oil prices, he added.

However, according to Anas Alhajji, an energy economist at Energy Outlook Advisors, the situation could be “less bearish than perceived.”

“The impact is less bearish than perceived by media and market participants,” Alhajji said in his May 3 newsletter. “This raises the production ceiling and not necessarily production. Raising production ceiling legitimizes overproduction that is already in the market. Supplies to the international market (Exports) will be significantly lower.”

Another challenge for global energy markets, meanwhile, could be slowing Chinese demand.

A pump jack operates near a crude oil reserve in the Permian Basin oil field near Midland, Texas, on Feb. 18, 2025. Eli Hartman/Reuters

President Donald Trump’s aggressive tariff strategy is beginning to affect the world’s largest petroleum importer, as factory activity has tanked.

“We saw some very poor GDP numbers out of China yesterday. We’re now seeing very large estimates of job growth loss from 5 to 10 million jobs. So the Chinese economy is slowing down substantially here. So what we will first want to see is a de-escalation,” Treasury Secretary Scott Bessent said in a May 1 interview with Fox Business Network’s Maria Bartiromo.

The latest developments have prompted downward adjustments to price forecasts.

According to ING, Brent crude oil prices will average $65 per barrel this year, down from the previous estimate of $70.

Goldman Sachs projects Brent crude to average $60 a barrel for the rest of 2025 and $56 per barrel next year. Both forecasts are down $2 from the bank’s previous predictions.

The Impacts on Gasoline

A continued trend of lower prices would provide further relief on the inflation front, particularly for motorists.

According to the American Automobile Association, the national average for a gallon of gasoline is nearly $3.17, down more than 14 percent from a year ago.

The steady slide has eased the annual headline inflation rate in the latest consumer price index (CPI) report.

However, despite the enormous decline in oil prices, which account for about half the price drivers pay at the pump, gasoline has not followed the same accelerated downfall. Gas is up 2 cents from a week ago at the retail level.

Even at wholesale, gas is only down 0.5 percent this year, trading at around $2 per gallon.

Trump recently said the price of gasoline is “down to $1.98 in many states.” However, GasBuddy data show Mississippi has the lowest average regular gas price, at around $2.62 per gallon.

“Summer travel season is almost here, and it’s been mostly good news for US drivers: The national average price of gas has fallen for the last two weeks, now standing at $3.15 per gallon. While the news is still positive, rumors of $1.98 gas in some states this week appear to be overly optimistic,” the organization said in late April.

“According to GasBuddy data from over 150,000 fuel locations nationwide, no station has offered a price under $2 per gallon yet this year.”

In last month’s Short-Term Energy Outlook report, the Energy Information Administration projected the average gasoline retail price would be $3.10 in 2025 and 2026.