OIL FUTURES: Crude down on OPEC+ decision to raise June production

Crude oil futures fell in mid-afternoon Asian trade on May 5 as OPEC+'s decision to increase production in June weighed on oil bears.

At 4:18 pm Singapore time (0818 GMT), the ICE July Brent futures contract was down $1.27/b (2.07%) from the previous close at $60.02/b, while the NYMEX June light sweet crude contract was down $1.35/b (2.32%) from the previous close at $56.94/b.

US crude oil prices dropped to $55.50/b at the open, losing over 4% in after-hours trading after OPEC+ agreed to boost output by 410,000 barrels in June. The alliance also hinted at accelerating production hikes as a punitive measure against member countries that were non-compliant with production quotas.

"The official communication says the group is bringing barrels back to the market because 'fundamentals are healthy and inventories are low'. Yet global growth expectations have been crumbling due to a heated trade war between the US and the rest of the world, and rising output only worsens oversupply concerns," Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said.

Analysts said further supply-side woes weighed crude oil futures prices as the market hopes for additional Iranian and Russian barrels to enter global supplies.

Oil prices fell nearly 16% by the end of April as investors continued to anticipate an oversupplied market.

"Oil prices have [also] been immensely pressured amid growing uncertainty around US-China tariff talks and the potential adverse impact of worsening trade relations on fuel demand," Priyanka Sachdeva, senior market analyst at Phillip Nova, said.

"With uncertainty surrounding demand and investors largely convinced that the oil market is oversupplied, the bearish outlook for oil is likely to persist," Sachdeva added.

Market analysts noted that the bears' $50/b target price now appears easier to reach than three days ago.

"Any price rallies will likely present interesting opportunities to strengthen bearish positions. Lower oil prices are obviously a straight positive for bringing inflation lower," Ozkardeskaya from Swissquote Bank added.

Analysts remain cautious regarding the US Federal Reserve implementing imminent rate cuts, looking to macroeconomic data for direction.

"Chair Powell has made it clear in recent weeks that the inflation trajectory remains highly uncertain due to tariff policy, pushing the Fed to be cautious. Some Fed members seem more open to action, but any move must be driven by data," Ozkardeskaya continued.

The market is focused on the upcoming Federal Open Market Committee meeting scheduled for May 6-7.

"The next consumer price index update is due next week. Until then, the Fed will remain in focus, as it is expected to announce no change to its policy this week. However, June expectations could change," Ozkardeskaya said.

Dubai crude

Dubai crude swaps and intermonth spreads were mixed in mid-afternoon Asian trading on May 5 from the previous close.

The July Dubai swap was pegged at $58.35/b at 2:30 pm Singapore time (0630 GMT), down by $2.72/b (4.45%) from the previous Asian market close.

The June-July Dubai swap intermonth spread was pegged at 19 cents/b, narrower by 14 cents/b over the same period, and the July-August Dubai swap intermonth spread was pegged at 5 cents/b, narrower by 10 cents/b over the same period.

The July Brent-Dubai exchange of futures for swaps was pegged at $1.18/b, wider by 20 cents/b over the same period.