Oil prices slide after OPEC+ output hike
Source: AFP
Oil prices slumped on Monday after OPEC+ countries announced a sharp production increase despite oversupply concerns and growing fears that US President Donald Trump's trade war could weaken demand.
Saudi Arabia, Russia and six other members of the oil cartel announced over the weekend an output increase of 411,000 barrels a day for June, a month after a similar move had already caused prices to fall.
The price of crude has also been sliding because of fears of a global economic slowdown on the back of Trump's tariff onslaught.
The OPEC+ move "confirms a stark turnaround away from the production cuts that have persisted since 2022", said a Deutsche Bank research note.
Oil prices fell almost four percent before paring back some losses.
Brent, the international benchmark, was trading at just under $60 per barrel at around 0715 GMT.
Some analysts pointed to pressure from Trump to lower prices and expectations of declining Iranian oil exports amid tighter sanctions, as possible reasons for the unexpected move.
Others said the motivation was unclear.
"The weekend news wasn't a shocker but the reasons behind the move remain uncertain," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
"The official communication says the group is bringing barrels back to the market because 'fundamentals are healthy and inventories are low'," Ozkardeskaya said.
"Yet global growth expectations have been crumbling due to a heated trade war between the US and the rest of the world, and rising output only worsens oversupply concerns. So the real reason must be something else," she added.
She said some argued that the Saudis were "punishing" OPEC members who had not complied fully with the previous policy of cutting production.
Other theories include that Trump wants to lower oil prices to hurt Russian finances and speed up the end of the Ukraine war, or that Riyadh wants to push out US shale businesses and increase its market share.
"We don't know for sure. The exact motive remains unclear," Ozkardeskaya said.
Fed move
On stock markets, Paris was down in early deals while Frankfurt was up in holiday-thinned trading, with London, Tokyo and Hong Kong closed.
Investors are waiting for interest rate decisions this week, with the US Federal Reserve and Bank of England holding policy meetings on Wednesday and Thursday respectively.
"Our US economists expect the Fed to keep rates steady and avoid explicit forward guidance about the policy path ahead," Deutsche Bank analysts said.
Among the few Asian markets that were open, Taiwan was in the red while the Jakarta Composite Index rose.
The Australian dollar gained against the US dollar after Prime Minister Anthony Albanese's election victory on Saturday, while the S&P/ASX 200 fell almost one percent.
The dollar fell against other major currencies.
Wall Street stocks concluded a strong week on a winning note on Friday, notching solid gains on good US jobs data and improving sentiment about US-China trade talks.
Key figures at around 0725 GMT
Paris - CAC 40: DOWN 0.4 percent at 7,741.31 points
Frankfurt - DAX: UP 0.3 percent at 23,155.25
London - FTSE 100: closed for holiday
Tokyo - Nikkei 225: closed for holiday
Hong Kong - Hang Seng Index: closed for holiday
Shanghai - Composite: closed for holiday
Euro/dollar: UP at $1.1321 from $1.1299 on Friday
Pound/dollar: UP at $1.3286 from $1.3268
Dollar/yen: DOWN at 144.35 yen from 144.97
Euro/pound: UP at 85.22 pence from 85.14
West Texas Intermediate: DOWN 2.4 percent at $56.88 per barrel
Brent North Sea Crude: DOWN 2.2 percent at $59.94 per barrel
New York - Dow: UP 1.4 percent at 41,317.43 (close Friday)
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Source: AFP
