Nigerian crude fell below the Federal Government’s benchmark, selling for $65 per barrel, as OPEC increased production despite heightened geopolitical uncertainty.
Nigerian cargoes loaded on May 10 remain unsold, reflecting a lack of enthusiasm from buyers and sellers regarding the recent price trends in West African crude.
Flat differentials are driven by a backwardated market structure and elevated freight costs.
The premature willingness of Saudi Arabia and other OPEC+ members to implement deeper production cuts heading into the summer has dampened market sentiment. As a result, Brent prices once again dropped below $62 per barrel.
A potential U.S.-Iran rapprochement or a breakthrough in Russia-Ukraine peace talks represent the two biggest threats to oil markets, which currently lack strong bullish drivers.
OPEC revamps oil Production
OPEC+ has decided, for the second consecutive month, to raise oil production by an additional 411,000 barrels per day in June, despite signals of declining demand, weakening prices, and bearish market sentiment.
This decision came after just over an hour of online deliberation on the current state of the market and inventory levels. In response to price moderation, the group stated that “the fundamentals of the oil market are healthy, and inventories are low.”
- In early April, oil prices nosedived, hitting a four-year low of below $60 per barrel after OPEC+ unexpectedly announced an increase in production for May, compounded by looming U.S. tariffs under President Trump.
- Saudi Arabia’s aggressive push for deeper OPEC cuts has been linked to efforts to enhance compliance among members like Iraq and Kazakhstan, which have struggled to meet output targets on schedule.
- These additions are also a response to pressure from President Trump, who urged OPEC+ to increase output. He is expected to visit Saudi Arabia by the end of May.
An agreement reached last December among eight OPEC+ members called for gradually raising output caps and phasing out restrictions. Under this agreement, a reduction of 138,000 barrels per day will be phased out by April 2025.
The upcoming increase in June will bring total hikes across April, May, and June to 960,000 barrels per day—representing 44% of the 2.2 million bpd production cut.
Kazakhstan’s energy minister defied OPEC+ by stating that the country would prioritize national interests when determining oil production levels. Despite a 3% decline in April output, Kazakhstan exceeded its OPEC+ quota.
The Organization of the Petroleum Exporting Countries and its allies, including Russia (OPEC+), are currently reducing output by nearly 5 million barrels per day. Many of these cuts are expected to continue until the end of 2026. A full ministerial meeting is scheduled for May 28.
US-China trade war
Additionally, traders remain cautious about a potential de-escalation in the U.S.-China trade dispute, after Beijing announced on Friday that it was considering a Washington proposal to resume talks on President Donald Trump’s tariffs.
Although there is some optimism regarding U.S.-China relations, the signals remain preliminary. Trump’s Thursday threat to impose secondary sanctions on purchasers of Iranian oil added to downward pressure on prices by raising the prospect of a global supply shortage.
The postponement of U.S.-Iran nuclear talks may further complicate trade negotiations with China, the world’s largest importer of Iranian crude.
