‘Bombshell’ OPEC+ production hike decision hits oil prices

HONG KONG

Oil prices slumped Monday after eight OPEC+ members announced a sharp increase in production, while Asian stocks treaded water in thin trade with major markets closed.

The output increase of 411,000 barrels a day announced by Saudi Arabia, Russia and six other members of the oil cartel on May 3 added to concerns about over-supply.

The price of crude has already been sliding because of fears of a global economic slowdown on the back of U.S. President Donald Trump's tariff onslaught.

"OPEC+ has just thrown a bombshell to the oil market," Jorge Leon, analyst with Rystad Energy, told AFP.

"[Saturday's] decision is a definitive message that the Saudi-led group is changing strategy and pursuing market share after years of cutting production," he added.

The group said strong fundamentals were behind the decision, though analysts also speculated that it might reflect a desire to curry favor with Trump before he makes a visit to the Middle East later this month.

Prices have fallen nearly 20 percent in the past three months as traders have factored in the likely impact of Trump's trade policies on the global economy.

“Washington wants cheap energy, and Gulf producers still lean on U.S. security guarantees; the White House bears down, they listen,” Stephen Innes of SPI Asset Management said in a commentary.

“In that sense the U.S. President has become an unofficial swing vote inside OPEC+,” he said.

U.S. crude oil is down about 17 percent for the year and prices are falling to a point, however, where many producers can no longer turn a profit.