OPEC+ Agrees Another Supply Surge in June to Deepen Oil Rout

[BumRushDaShow]

Source: Bloomberg

May 3, 2025 at 5:13 AM EDT
Updated on May 3, 2025 at 7:48 AM EDT


OPEC+ agreed to surge output again in June, as the group’s leaders continue an accelerated revival of supply aimed at punishing over-producing members that has sent crude prices plunging. Key nations led by Saudi Arabia and Russia agreed to add 411,000 barrels a day next month, according to a statement on OPEC’s website following a video conference on Saturday. The hike mirrors a similar increase announced last month, when the group made the shock decision to bring back triple the planned volume for May.

Crude traders had already been bracing for a large increase after Saudi Arabia signaled in recent weeks that it was willing to accept a prolonged period of low oil prices. But it builds on a dramatic reversal in recent months from the cartel’s longstanding position of defending oil prices, raising questions about the future of the alliance and spurring speculation about a price war.

While the statement cited “current healthy market fundamentals,” OPEC+ delegates have attributed the strategy shift to Saudi frustration with overproduction by members like Kazakhstan and Iraq, and have chosen to discipline them through the financial “sweating” of a price slump.

“OPEC+ has just thrown a bombshell to the oil market,” said Jorge Leon, an analyst at Rystad Energy A/S, who previously worked at the OPEC secretariat. “With this move Saudi Arabia is seeking to punish lack of compliance particularly from Kazakhstan but also ingratiate with President Trump’s push for lower oil prices.”

Read more: https://www.bloomberg.com/news/articles/2025-05-03/opec-agrees-another-oil-supply-surge-for-june-delegates-say

---

What is missing out of all of this is that the "drill baby drill" crowd will suddenly find out that the price/bbl will not be enough for their "breakeven" cost for any new drilling/fracking, let alone turn a profit on those wells for some time.



(above and below from here - https://mercercapital.com/2025-u-s-oil-outlook/)

Most U.S. firms surveyed recently are not planning on increasing their investments for 2025, even after now knowing who will be in the White House for the next four years. In fact, industry consultant Wood Mackenzie just released a report on 2025 guidance for upstream companies capital budgets. They estimate 2025 corporate capital budgets to be down by 1.8% compared to 2024. These are not indicators of an industry that is “chomping at the drill bit” right now. One reason is that breakeven prices to drill new wells ranged from $59 – 70 as an industry average in 2024 according to the Dallas Fed Survey suggesting a mediocre economic prospect.

The above came out in January, before the tariffs fiasco and the latest OPEC+ decision.

Spot Price of oil (WTI) as of 5/2/25 at the close -