Crude oil prices dropped for the third straight session on Thursday, as markets prepared for key nuclear talks between the United States and Iran. Investors grew increasingly concerned that Iran, which holds roughly a third of the world’s oil reserves, may soon resume exports—adding to global supply.
OPEC+ Production Plans Fuel Oversupply Worries
Bloomberg reported that the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, may approve a third consecutive production increase in July. This development has raised fears of oversupply and added downward pressure on prices.
During Asian trading on Friday, oil prices continued to decline. By 4:40 a.m. CEST, Brent crude futures were down 0.59% at $64.06 per barrel, while West Texas Intermediate (WTI) futures dropped 0.6% to $60.83 per barrel. Both hit their lowest levels in over a week.
Supply Concerns Dominate Market Sentiment
In recent weeks, crude prices have swung sharply. Traders are weighing the impact of geopolitical risks against the potential for rising output from major producers. Broader macroeconomic trends, such as easing trade tensions between the U.S. and China and changes in U.S. Treasury yields, are also shaping market behavior.
Earlier this week, prices surged briefly following a CNN report that Israel might strike Iran’s nuclear facilities based on U.S. intelligence. But analysts suggest this warning could be a strategic move by Washington to pressure Tehran ahead of talks.
Inventory Data Dampens Geopolitical Momentum
On Wednesday, bullish sentiment driven by geopolitics was overshadowed by bearish U.S. inventory data. The Energy Information Administration (EIA) reported that U.S. crude oil inventories rose to 443.2 million barrels for the week ending May 16—the highest level since July 2024. Net imports also climbed for a third consecutive week, while domestic demand lagged expectations.
OPEC+ Eyes Bigger Output Hike in July
Markets were hit again on Thursday by reports that OPEC+ may increase production by 411,000 barrels per day in July. The final decision is expected at the group’s next meeting on June 1.
OPEC+, which controls about 40% of global oil supply, had already cut output by around 2.2 million barrels per day in 2023. The phased cutbacks have been rolled back faster than anticipated—starting with a 135,000 bpd increase in April, then expanding to 411,000 bpd in both May and June.
Analysts say the swift reversal in cuts may be a disciplinary move against members who exceeded quotas, with Kazakhstan and Iraq among the top violators.
Price Declines May Reflect Anticipated Decision
Crude prices have continued falling since April and May, when OPEC+ approved unexpectedly large production hikes. Traders may already be pricing in another increase for July—unless the cartel surprises with an even bigger adjustment.
Weak Demand Outlook Adds to Pressure
The global demand outlook remains fragile. Slowing economic growth and trade-related uncertainties, especially U.S. tariffs, continue to weigh on confidence. Crude prices fell to four-year lows on April 9 and again on May 5.
Markets did bounce earlier this month after the U.S. and China agreed to suspend mutual tariffs for 90 days. Still, demand concerns persist.
Analysts See Potential for Recovery if Trade Talks Progress
Despite short-term pressure from oversupply, some analysts remain hopeful about future demand recovery.
“While immediate pressure is coming from the supply side, I believe that in the longer term, further progress in tariff negotiations between the U.S. and key partners could revive demand and provide more meaningful support for oil,” said Dilin Wu, a research strategist at Pepperstone Australia.
