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Oil prices extended losses on Thursday, pressured by rising concerns over a potential increase in global supply and weaker-than-expected demand data from the United States. The latest downturn reflects renewed anxiety that the crude market may face a period of oversupply heading into the summer months.
At 04:55 ET (08:55 GMT), Brent crude futures fell 1.2% to $64.16 a barrel, while West Texas Intermediate (WTI) futures dropped 1.2% to $60.86.
OPEC+ Considers July Production Increase
According to a report from Bloomberg News, OPEC and its allies (OPEC+) are currently in discussions over another potential production hike, with a proposed increase of 411,000 barrels per day for July reportedly under consideration. The group has already been gradually unwinding previous output cuts, having boosted production in both May and June.
While no final decision has been made, the prospect of additional supply entering the market has unsettled traders, particularly as demand signals remain mixed and global inventories stay elevated.
Surprise Crude Inventory Build in U.S.
Further weighing on prices was data from the U.S. Energy Information Administration (EIA) showing an unexpected 1.3 million-barrel rise in crude inventories for the week ending May 16, bringing total U.S. stockpiles to 443.2 million barrels.
The build contradicted analyst expectations of a drawdown and reinforced fears that the market is currently oversupplied.
Adding to the bearish tone, gasoline and distillate inventories also increased, rising by 816,000 and 580,000 barrels, respectively. This suggests that refined product demand remains tepid, despite the approach of the typically high-consumption summer driving season in the U.S.
U.S.-Iran Nuclear Talks May Unlock Additional Supply
Oil markets are also watching developments in U.S.-Iran nuclear negotiations, with the fifth round of talks scheduled for May 23 in Rome. If an agreement is reached that results in the easing of U.S. sanctions, Iran could significantly ramp up its oil exports, further adding to global supply.
Iran, the third-largest producer within OPEC, has maintained reduced exports under the weight of Western sanctions. However, its infrastructure enables it to bring substantial volumes online swiftly if restrictions are lifted.
Outlook Clouded by Supply Risk
While summer demand may eventually offer some support to prices, the near-term outlook remains fragile. Traders are now balancing the potential for a rebound in global consumption against the likelihood of supply surges from both OPEC+ and Iran, as well as rising inventories in the U.S.
Until clarity emerges from the upcoming OPEC+ meeting on June 1 and the outcome of U.S.-Iran nuclear talks, oil markets may remain volatile and prone to downside pressure.
