Crude fell 2% on OPEC+ output hike fears

Oil prices dipped by around 2% on Wednesday as investors reacted to reports that OPEC+ may pursue an aggressive production hike in June. However, the downside was cushioned by signs of robust US fuel demand.

Brent crude futures settled down $1.32, or 1.96%, at $66.12 a barrel.

US West Texas Intermediate crude dropped $1.40, or 2.2%, to close at $62.27.

Sources indicated that several OPEC+ members were preparing to propose a sizeable output increase for June, involving a volume similar to the 411,000 bpd increase planned for May. The news unsettled investors, many of whom recalled the earlier hike’s role in dragging benchmarks to four-year lows earlier in the month.

Sentiment was further pressured as the market weighed ongoing quota breaches among OPEC+ members. Kazakhstan remained above its ceiling despite a 3% output decline between March and April, while Iraq continued to raise exports in defiance of earlier commitments to cut volumes.

Even so, downside momentum was partially curbed by bullish demand-side signals from the US, including government data showing that gasoline and distillate inventories declined more than expected in the week ending 18 April.

Written by: Derek Yong