Oil Prices Drop on OPEC+ Output Concerns and Rising U.S. Inventories

Oil prices continued to fall in Asian trading on Friday, heading for weekly losses as oversupply fears were reignited by reports that OPEC+ may boost production. Brent crude futures for July slipped 0.5% to $64.11 per barrel, while West Texas Intermediate (WTI) futures dropped 0.5% to $60.92. Both benchmarks are poised to end the week nearly 2% lower.

According to Bloomberg, OPEC and its allies, collectively known as OPEC+, are considering a 411,000-barrel-per-day production increase in July, though no final decision has been made. The potential hike would mark a strategic pivot by the group, shifting focus from price defense to market share, analysts at ING noted. OPEC+ has already begun easing output cuts, with production ramp-ups scheduled for May and June.

Oversupply concerns were further amplified after the U.S. Energy Information Administration (EIA) reported an unexpected rise in crude inventories, up 1.3 million barrels for the week ending May 16. This followed the American Petroleum Institute's report earlier in the week of a 2.5 million-barrel build, compounding market bearishness.

Adding to the uncertainty, U.S.-Iran nuclear talks resume Friday in Rome, with Oman mediating. A key dispute remains Iran’s uranium enrichment. A breakthrough in negotiations could ease sanctions, potentially unleashing more Iranian crude into an already saturated market.

Traders are closely watching the outcome of the OPEC+ meeting on June 1 and developments in U.S.-Iran talks, as both could significantly impact global oil supply dynamics. With demand recovery still fragile, any increase in supply could weigh further on prices.