Oil prices dropped sharply Monday after OPEC+ announced a fresh production increase of 547,000 barrels per day for September, signaling a full reversal of its earlier major output cuts and raising concerns of oversupply. Brent crude futures slid $1.55, or 2.2%, to $68.12 per barrel-its lowest level since July 23-while U.S. West Texas Intermediate fell $1.72, or nearly 2.6%, to $65.61.
The supply boost, endorsed by the Organization of the Petroleum Exporting Countries and allies including Russia, completes the unwinding of a 2.5 million bpd cut initiated in 2023. The move, anticipated by traders, is seen as part of a broader effort to regain global market share as demand softens.
"Oil prices are under pressure because of the OPEC+ decision," said Tamas Varga, analyst at PVM Oil Associates. He noted that discussions to unwind a further 1.65 million bpd of cuts added downward price pressure.
Bjarne Schieldrop, chief commodities analyst at SEB AB, warned: "Global oil inventories are set to rise further in the second half of 2025 and crude oil prices will likely be forced lower."
Analysts at Goldman Sachs forecast that actual supply growth may hit 1.7 million bpd, despite internal production reductions by some OPEC+ members who had previously overproduced.
Meanwhile, geopolitical risks remain elevated. U.S. President Donald Trump has threatened to impose 100% secondary tariffs on countries purchasing Russian crude, intensifying pressure on Moscow amid its ongoing war in Ukraine. "In the medium term, oil prices will be shaped by a mix of tariffs and geopolitics," Varga said.
Despite these threats, Indian officials told Reuters that the country will continue importing Russian oil. Prime Minister Narendra Modi has maintained a firm stance, resisting U.S. pressure, even as at least two oil tankers en route to Indian refineries diverted in recent days due to the new sanctions.
Trade data from LSEG indicates that up to 1.7 million bpd of crude supply could be jeopardized if Indian refiners halt Russian imports. ING analysts warn that such a development could tighten the market in the near term but may ultimately be offset by surplus supply from other regions.
U.S. special envoy Steve Witkoff is expected to visit Russia on Wednesday, as the White House evaluates further energy-related sanctions.
