FEAR of OPEC+ quota increases is overblown - May 27

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Oil prices dipped on Tuesday as traders weighed the likelihood of increased output from OPEC+ following signals that the group may raise production quotas levels at its upcoming meeting. < Quotas and physical supply increases are much different. Half of the OPEC cartel countries cannot produce up to their quotas.

Brent crude futures dropped by $1.06 to $63.68 a barrel, while West Texas Intermediate (WTI) fell by the same margin to $60.47, though the latter had not settled on Monday due to the U.S. Memorial Day holiday. Analysts like ANZ’s Daniel Hynes pointed to expectations of higher OPEC+ supply as the key factor dragging down prices.

As you know, OPEC+ is gearing up for a July output increase of roughly 411,000 barrels per day, with final decisions expected during an online ministerial meeting tomorrow on May 28th.

Adding even more urgency to this discussion is the fact that eight OPEC+ members that previously pledged additional voluntary production cuts are now set to meet earlier than planned. Their adjustments would follow already agreed-upon supply hikes for the month of June.

However, geopolitical tensions continue to add complexity to the market outlook. President Trump’s decision to delay trade negotiations with the European Union until July helped ease short-term concerns about fuel demand suppression via tariffs.

And then we have the real wildcard: Iran. The country’s state oil firm officially raised its selling price for its light crude to Asian buyers for June, while Iranian President Masoud Pezeshkian suggested that the nation could weather the storm if ongoing nuclear negotiations with the U.S. fail.

If talks collapse, ongoing sanctions would continue to constrain Iranian oil supply, which in turn could act as a counterweight to bearish pressures and lend support to global prices.