Oil prices slide after OPEC+ output hike ~ EconomyLens.com

PARIS (AFP) – Oil prices slumped on Monday after OPEC+ countries announced a production hike despite oversupply concerns and growing fears that US President Donald Trump’s trade war could weaken demand. Stock markets were mostly down in holiday-thinned trading ahead of central bank decisions later in the week, while shares in film companies fell after Trump announced tariffs on movies made outside the United States.

Saudi Arabia, Russia, and six other members of the oil cartel announced over the weekend an output increase of 411,000 barrels a day for June, a month after a similar move had already caused prices to fall. The price of crude has also been sliding because of fears of a global economic slowdown on the back of Trump’s tariff onslaught. The OPEC+ move “confirms a stark turnaround away from the production cuts that have persisted since 2022,” said a Deutsche Bank research note. Oil prices fell almost four percent before paring back some losses. Brent, the international benchmark, briefly fell below $60 per barrel for the first time since 2020.

Analysts were still trying to pinpoint the oil cartel’s motivation. “The weekend news wasn’t a shocker but the reasons behind the move remain uncertain,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “The official communication says the group is bringing barrels back to the market because ‘fundamentals are healthy and inventories are low’,” Ozkardeskaya said. “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. So the real reason must be something else,” she added.

She said some argued that the Saudis were “punishing” OPEC members who had not complied fully with the previous policy of cutting production. Other theories include that Trump has pressed for lower oil prices to hurt Russian finances and speed up the end of the Ukraine war, or that Riyadh wants to push out US shale businesses and increase its market share. “We don’t know for sure. The exact motive remains unclear,” Ozkardeskaya said.

On stock markets, Wall Street’s three main indices slid lower at the opening bell. US stocks are coming off two strong weeks, with gains last Friday driven by strong jobs data and improving sentiment about US-China trade talks. Shares in Berkshire Hathaway fell more than five percent after influential billionaire investor Warren Buffett said Saturday he would retire from leading the firm which he built into a conglomerate worth more than $1 trillion. Shares in entertainment firms slid after Trump said Sunday he was ordering new tariffs on all films made outside the United States, claiming Hollywood was being “devastated” by a trend of US filmmakers and studios working abroad. Shares in Netflix and Warner Bros. Discovery were down around three percent, while Lionsgate fell more than five percent. Shares in Paramount dropped more than two percent and Disney 1.5 percent.

In Europe, Paris was down in afternoon deals while Frankfurt pushed higher. London was closed for a public holiday, as were Tokyo and Hong Kong in Asia. Investors are waiting for interest rate decisions this week, with the US Federal Reserve and Bank of England holding policy meetings on Wednesday and Thursday respectively. “Our US economists expect the Fed to keep rates steady and avoid explicit forward guidance about the policy path ahead,” Deutsche Bank analysts said.

The dollar fell against other major currencies. But the Australian dollar gained against the US dollar after Prime Minister Anthony Albanese’s election victory on Saturday, while the S&P/ASX 200 fell almost one percent.