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OPEC+ has decided to increase oil production in May, raising the output by approximately 411,000 barrels per day (bpd) instead of the previously planned 135,000 bpd. This adjustment followed a two-hour meeting among the ministers.
The next meeting for OPEC+ is set for May 5, where they will discuss production levels for June.
Shift In Output Strategy
This shift in production marks a clear deviation from the previously conservative approach aimed at propping up prices through restrained supply. By opting for a steeper increase in output, producers are sending a signal that they view current market conditions as stable enough to absorb additional barrels without triggering an unwanted drop in prices. The ministers opted to expand May’s target by over three times the earlier scheduled increase—an assertive move likely informed by steady demand indicators and manageable stock levels in consuming nations.
For those of us active in derivative markets, this decision introduces a slightly altered set of conditions to factor into our pricing expectations. A 411,000 bpd increase is far from marginal—it has tangible implications for the supply-demand balance, particularly as we approach the start of peak driving season in much of the Northern Hemisphere. With additional volumes expected to start flowing into the market shortly, we should be watching the response from inventories in key importing countries, especially the United States and China. If draws continue, then supply is being comfortably absorbed; if builds begin to climb, pressure could mount on near-dated contracts.
Given the timing of the next OPEC+ meeting on 5 May, and the group possibly using that occasion to lock in or even enhance allocations for June, the weeks leading up to it will likely be shaped by evolving positioning in forward curves. Longer-dated contracts may begin to reflect greater certainty of supply growth, while spot and prompt months will fluctuate more directly with product demand data and any shifts in refinery utilisation rates.
Impact On Market Behavior
The key thing here is that spreads between front-month and later-month contracts might widen or tighten based on traders’ confidence in OPEC+ follow-through. If history is any guide, the group’s ability to meet increased targets has varied—so actual export data will carry more weight than formal announcements alone. That means closely tracking ship-tracking data and port loadings, especially from key Gulf producers, will be critical in confirming that these output gains do more than exist on paper.
What this means, in practical terms, is a more active period for calendar spread trades. A stronger front-month contract might be countered by selling longer maturities if participants doubt the staying power of elevated demand or expect further supply responses from competing producers. Volatility could tick higher in the short-term segment of the curve, particularly as we enter earnings season for oil majors, whose hedging strategies may affect traded volumes and directional bets.
Finally, it’s worth considering what this adjustment tells us more broadly. The two-hour length of the meeting doesn’t suggest discord, but rather coordination and firm decision-making. So while we shouldn’t reinterpret this as a complete shift toward long-term output expansion, the commitment to a more generous May target tells us that the group is at least temporarily comfortable broadening supply, provided underlying fundamentals don’t falter. The next few weeks, then, warrant increased attention to cargo liftings, refining margins, and any unplanned outages—not just the headline figures.
