Global crude oil prices dropped sharply on Monday following the decision by the OPEC+ alliance to increase oil output in September, stoking fears of oversupply amid weakening fuel demand in the United States. The move, while anticipated by industry analysts, has injected renewed volatility into an already fragile oil market.
Brent crude futures dropped by 43 cents (0.6%) to $69.24 per barrel, while U.S. West Texas Intermediate (WTI) slid by 48 cents (0.7%) to $66.85 per barrel—both contracts posting their lowest levels in a week. Monday’s slump follows a steep decline on Friday, when both benchmarks lost nearly 3% of their value.
The fall comes amid growing concerns that the market could soon be flooded with surplus oil, especially as U.S. data reveals a slowdown in gasoline consumption. According to government figures, gasoline demand in May—the start of the country’s peak summer driving season—was the weakest since the 2020 pandemic.
Adding to the bearish sentiment, the United States reported a record-high oil production level for May, compounding fears that demand will not keep pace with rising global supply.
The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, announced on Sunday a production boost of 547,000 barrels per day (bpd) beginning in September. This marks the latest phase in the group’s strategy to roll back output cuts made during the COVID-19-induced market crash.
The decision brings the group’s rollback of previous cuts close to full reversal, especially the initial 2.5 million bpd reduction which accounted for nearly 2.4% of global oil demand. Market watchers expect that further supply releases could be discussed when OPEC+ reconvenes on September 7, potentially putting downward pressure on prices in the near term.
Analysts have noted that while OPEC+ still holds considerable spare production capacity, its next moves will be crucial in determining price direction. “There are no clear signals yet that OPEC+ will tap deeper into its reserves, but the option remains on the table,” said Alex Hodes, an analyst with StoneX.
Meanwhile, Nigeria’s oil sector appears to be making a modest recovery. According to Gbenga Komolafe, Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), the country’s oil output exceeded 1.8 million bpd in July—its highest since November 2023. The current average stands at 1.78 million bpd.
This is a welcome development for Africa’s largest oil producer, which relies on crude for over 80% of its foreign exchange earnings and nearly two-thirds of government revenue. Komolafe said the NUPRC is working closely with stakeholders to sustain this growth, enhance transparency, and stabilize the economy.
Investor sentiment remains cautious amid ongoing geopolitical tensions. Former U.S. President Donald Trump has threatened to impose 100% secondary tariffs on buyers of Russian crude—a move that could disrupt global supply chains and add new dimensions to the oil market’s uncertainty.
Trump has also warned of significantly higher tariffs on India in response to its continued purchase of Russian oil. Indian government officials confirmed that they would maintain their imports from Moscow, defying the tariff threats. Analysts at ING warn that if Indian refiners halt purchases, about 1.7 million bpd of supply could be disrupted.
The political risk premium has helped limit oil’s losses for now, but traders remain wary. With rising production on one hand and soft demand on the other, the market faces a tight balancing act in the coming months.
Analysts at Goldman Sachs project that the actual increase in supply from the eight OPEC+ countries that have been scaling up output since March will amount to 1.7 million bpd, due to compensatory cuts by other members. This nuanced distribution of supply may ease some market anxiety, but not entirely erase it.
As oil prices dip, countries like Nigeria will need to capitalize on production gains to cushion fiscal vulnerabilities. With inflationary pressures still present and global demand patterns shifting, sustained investment and policy consistency will be critical to Nigeria’s energy sector stability.