OPEC+ Oil Production and Brent Crude: Key Factors Driving Price Fluctuations

Commodity

Summary:

Oil prices jumped 3.75% after OPEC+ raised output less than expected, amid Russia-Ukraine tensions, weaker U.S. dollar, Iran uncertainty, and technical signals favoring short-term bullish momentum in Brent crude.

Oil prices surged yesterday ending the day with a 3.75% gain as OPEC+ surprised markets with a supply increase that came in below expectations. Add to this rising tensions between Russia and Ukraine over the weekend and the perfect cocktail for gains materialized.

Ukraine launched major drone attacks on several Russian airfields just before peace talks between the two countries this week. Meanwhile, some US senators are pushing for stricter sanctions on Russia, including a proposal for 500% tariffs on imports from nations that purchase Russian oil.

This could in part explain yesterday's rally.

OPEC+ Meeting, Russia-Saudi Arabia Tension

Saudi Arabia and Russia had a tough time agreeing on OPEC+ oil policies on Saturday. Saudi Arabia wanted to speed up oil production increases, while Russia preferred to hold off, according to sources familiar with the talks.

Tensions are growing between these two major OPEC+ members after years of smooth teamwork. The last big disagreement was in 2020, when both countries pumped as much oil as they wanted, causing prices to crash.

On Saturday, eight key OPEC+ members decided to increase oil production by 411,000 barrels per day starting in July, following similar increases in May and June. This is part of a plan to gradually reverse production cuts made over the past five years to stabilize the market.

Oil prices are trading at levels last seen in March 2021 when the post-covid recovery was underway. The price of Oil is posing challenges for Oil producers with US producers in particular feeling the heat. The Trump administration had eyed a massive oil drive during its campaign but recent rig counts show that with prices at current levels this does not seem plausible.

According to the latest Baker Hughes report, the number of active oil rigs in the US dropped by 4 to 461, marking the fifth week in a row of declines. Given that markets are concerned about a slowdown in global growth, a surge in US drilling activity in the next 12 months seems like a pipe dream at this point.

OECD Lowers Global Growth Forecast

The Organisation for Economic Cooperation and Development (OECD) has added to the fears of market participants by downgrading its global growth forecast for 2025 and 2026 from 3.3% to 2.9%.

However, judging by today's price action, market participants have for now shrugged this off as Oil prices have turned green for the day just as the US session begins.

What is Supporting Oil Prices?

Looking at all that we discussed above, one would think Oil prices should be under pressure. Sure, the OPEC+ production numbers may be a let down and partially supported prices, but with a worsening global outlook and PMI data from both China and the US one would assume Oil prices may be under pressure.

On Monday an Iranian Diplomat stated that Iran was poised to reject a US proposal to end the nuclear dispute which has kept severe sanctions in place on Iranian Oil exports and the country as a whole. This has raised the risk premium on Oil prices as markets had been pricing in a potential deal between the two countries which could have led to an increase in Iranian supply.

Another factor that could be aiding Oil prices of late could be the weaker US Dollar which has faced consistent selling pressure as concerns mount about the US deficit and slowdown in growth.

However, right now it is almost impossible to pinpoint one exact reason for the rally in Oil prices or whether it will continue.

Technical Analysis - Brent Crude

From a technical analysis standpoint, Brent remains in a range between the 66.90 resistance handle and support around the 62.80 handle.

Looking at price action, it remains rather mixed with the most recent lower low being followed up with a higher high, which means another change in structure has taken place.

Bulls appear to have the upper hand for now- with a daily candle close below the support handle at 62.80 needed for further downside to materialize.

On the downside support rests at 61.08 and the 60.00 psychological handle.

A move higher would require a close above the 66.90 handle before a move toward the 68.19 resistance handle may come into focus.

Brent Crude Oil Daily Chart, June 3, 2025

Client Sentiment Data

Looking at OANDA client sentiment data and market participants are long on WTI with 71% of traders net-long. I prefer to take a contrarian view toward crowd sentiment and thus the fact that so many traders are long means WTI prices could decline in the near-term.

source :marketpulse

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Adam

Forex

The picture for currencies today is the exact reverse of yesterday - with traders fading extremes and booking profits before events like the upcoming NFP.

Safe-Haven majors like the CHF and JPY are lagging on the day with the USD leading, closely followed by the CAD - the Euro is right in the middle of the currency board down 0.55% on the day.

The ECB Meeting is coming up on Thursday 5th of June with broad expectations of a 25 bps cut before pausing in the July meeting - taking the Deposit Rate from 2.25% to 2%. We will get the Rate Decision at 8:15.

We got the overnight Eurozone Inflation report with the Headline CPI coming in just below 2% - the ECB will want to make sure to push these numbers up slightly, although the Central Bank probably has taken into account the lag for new inflationary boosts from Tariffs on exports to the US.

Let’s take a look at the levels from Daily to Hourly charts to prepare for what’s next.

EUR/USD Technical Analysis

Daily Timeframe

URUSD Daily Chart, June 3, 2025.

The Daily timeframe is showing mixed signs in terms of strength - the trend is still bullish for the currency pair though candles have been overlapping in the past few weeks.

This story gets confirmed with the Daily RSI not showing signs of expansion - bulls will have to monitor the tone from the ECB at the press conference 30 minutes after the release.

Less cuts are expected going forward therefore action will be focused on better data for the Eurozone.

The daily MA 50 has caught up to the current prices and is currently acting as immediate support, accompanied with the trendline.

In the meantime, the action is constrained within the Main resistance and support zones which we will see in more detail promptly.

4H Timeframe

EURUSD 4H Chart, June 3, 2025.

Taking a closer look at the 4H timeframe emphasizes the lack of clarity going into the ECB Meeting.

Prices have been seesawing through the current main pivot situated at 1.1330 and constrained in a slightly above 1000 pip range between the 1.1270 - 1.13 to 1.1420 - 1.1440.

The RSI is neutral and the MA 50 and 200 are immediate support, though we are looking more at holding the trendline from the hourly upward channel formed last week. Expect rangebound prices going into Thursday.

Any breakout from the range is pointing towards these main zones:

Main Support Zone : 1.1050 to 1.1120

Main Resistance Zone: 1.1530 to 1.15730

Hourly Timeframe

EURUSD 4H Chart, June 3, 2025.

Prices just rejected the higher bound of the range and are now consolidating at the low of the upward channel.

Broad USD strength seems to be more on a mean-reversal basis therefore I am not expecting to see much direction.

Prices may try to test the MA 200 situated 300 pips from here therefore keep that one on your 1H charts.

Momentum is close to oversold on the hourly timeframe - keep in mind that markets tend to fade extremes going into key data, and NFP will still be looming on Friday - keep a close eye on the language from the ECB on Thursday, the conference is at 8:45 A.M. on the 5th of June.

Source: marketpulse

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Gerik

Economic

Global Growth Weakens Amid Rising Trade Tensions

The Organisation for Economic Cooperation and Development (OECD) has downgraded its global economic growth forecast, projecting a deceleration from 3.3% in 2024 to 2.9% in both 2025 and 2026. This represents a significant decline from the March forecast of 3.1% for 2025 and 3.0% for 2026. The downward revision is attributed primarily to intensified global trade tensions and increased uncertainty stemming from U.S. President Donald Trump's renewed tariff offensive.

Although the U.S. and China recently reached a temporary truce and tariffs on the EU have been postponed until July 9, the damage to investor confidence and trade flows has already materialized, with the OECD warning of further deterioration if protectionism persists.

United States Faces Sharp Growth Downgrade

The U.S. economy is expected to grow by just 1.6% in 2025 and 1.5% in 2026, a significant reduction from the previous forecast of 2.2% for 2025. These figures reflect the combined impact of elevated import prices due to tariffs, reduced consumer purchasing power, and suppressed business investment due to economic policy uncertainty.

Furthermore, the OECD noted that although tariffs have modestly boosted federal revenue, they are insufficient to offset the fiscal shortfall created by the extension of the 2017 Tax Cuts and Jobs Act, new tax cuts, and overall lower growth. Consequently, the U.S. budget deficit is projected to reach 8% of GDP by 2026—an unsustainable level for a non-wartime developed economy.

China and Europe Show Relative Resilience

While the U.S. outlook has darkened, China is expected to maintain moderate stability. The OECD projects 2025 GDP growth at 4.7% and 4.3% in 2026, only slightly lower than earlier estimates. This resilience is supported by government subsidies for trade-in programs targeting consumer durables and expanded welfare support to counterbalance tariff-related losses.

In contrast, the eurozone forecast remains unchanged, with GDP growth predicted at 1.0% in 2025 and 1.2% in 2026. The region benefits from declining interest rates, steady labor markets, and Germany’s plan to ramp up public investment—mitigating some external shocks.

UK Marginally Upgraded, But Risks Linger

The UK received a modest upward revision for 2025, with growth forecasted at 1.3%, compared to March’s 1.4%, while 2026 was slightly trimmed to 1.0%. These adjustments reflect persistent domestic resilience amid post-Brexit trade normalization and anticipated monetary easing, though broader risks remain due to European economic interdependence and trade exposure to both the U.S. and China.

The OECD's outlook underscores the unintended macroeconomic consequences of protectionist trade policy. While some proponents argue that tariffs can spur domestic production, the OECD analysis reveals that short-term gains are outweighed by suppressed consumer demand, capital investment hesitancy, and rising inflation. As inflationary pressures persist, the Federal Reserve is forecast to maintain current rates before implementing a cautious easing to 3.25–3.5% by the end of 2026.

If tariff escalations resume or if July’s EU tariff deadline is not further delayed, further downward revisions are likely. Policymakers in advanced economies will need to weigh domestic political considerations against global economic stability as they navigate an increasingly fragmented trade environment.

Source: Bloomberg

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Thomas

Economic

US President Donald Trump is set to hold trade talks with Chinese President Xi Jinping on Friday, according to White House officials, who said the meeting was “likely” to take place, but doubts remain that the meeting will be the turning point Trump hopes it will be.

A source familiar with the trade talks said Trump is “obsessed” with having a direct phone call with Xi. Trump believes he can resolve the deep trade disputes between the world’s two largest economies one-on-one with Xi. But that approach ignores the challenges the U.S. faces in trying to force China to fundamentally restructure their roughly $600 billion trade relationship. It also raises the question of what Trump’s ultimate goal is in this trade war.

The source said that China’s blocking of critical mineral exports to the US has increased the pressure on Washington. It is stated that China has taken a tough stance on the export of rare earth elements and magnetics, which are used in many areas from automotive and electronics production to the defense industry. The source said, “It is clear that Xi is not very keen on exporting these substances to the US. However, it is still highly likely that he will pick up the phone to listen to Trump.”

A former Trump official close to the White House said Trump believed a direct meeting between the leaders would cut through the noise of the process and get to the heart of the matter.

Source: CryptoSlate

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Adam

Stocks

Forex

Dollar General Corp. surged after increasing its annual guidance, helped by luring more higher-income shoppers looking for deals. The discount chain also said it expects to mitigate a significant amount of the tariffs currently in place.

The company sees same-store sales gaining as much as 2.5% this fiscal year, up from guidance in March calling for an increase as high as 2.2%. The retailer also nudged up expectations for earnings per share.

Shares of Dollar General jumped as much as 16% on Tuesday in New York, the biggest intraday gain since May 2022. The stock had jumped 28% this year through Monday’s close.

“Our core customer remains financially constrained,” Chief Executive Officer Todd Vasos said during a call with analysts. He added that more middle- and high-income consumers are trading down — a sign that even wealthy shoppers are looking for deals amid weakening sentiment. About 25% of the retailer’s customers have less income than last year, a survey it conducted showed.

The company, based in Goodlettsville, Tennessee, reported $10.4 billion in revenue for the quarter ended May 2, slightly above the average estimate of analysts. Dollar General also beat expectations for same-store sales growth.

Feeling Squeezed

The retailer’s low-income shoppers have been squeezed by inflation, and Vasos warned about 60% of Dollar General’s core customers said they felt pressured to skip buying some necessities in the coming year.

The company expects to offset most of the impact of those levies, but warned that “consumer spending could be pressured by tariff-related price increases.” It plans to raise some prices because of the levies.

source :Bloomberg

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Gerik

Economic

Bilateral Momentum Grows Amid Tight Deadline

U.S.-India trade talks are reportedly entering their final phase, with Commerce Secretary Howard Lutnick signaling a “not-too-distant” conclusion to the long-anticipated deal. Speaking at the US-India Strategic Partnership Forum, Lutnick highlighted the progress made and shared optimism that both sides are aligned on key interests. This comes as the Trump administration seeks to wrap up a series of trade negotiations ahead of its July 9 deadline.

India has not officially confirmed a timeline, but Chief Negotiator Rajesh Agrawal also noted that talks are “progressing well” with a “good outcome” expected. A U.S. trade delegation is set to visit New Delhi on June 5–6 for continued discussions.

Key Areas of Negotiation: Agriculture, Market Access, Defense

The U.S. is pressing India for lower tariffs on agricultural goods and broader market access for American companies, particularly in sectors like tech and services. India’s import tariffs on several categories—some reportedly as high as 100%—remain a major friction point. Lutnick described India as “very protectionist” and emphasized the need for a “reasonable” playing field for U.S. exporters.

In return, the U.S. is expected to expand access to its market for Indian goods, offering a path for India to boost exports and maintain momentum in its manufacturing-led economic strategy. Discussions also include deeper defense cooperation, with Washington encouraging India to increase its purchases of U.S. military equipment.

Strategic Relations as a Negotiating Asset

The political rapport between President Donald Trump and Prime Minister Narendra Modi is playing a pivotal role in advancing the deal. Lutnick noted that the strength of their relationship is “helping ease negotiations,” suggesting that political will at the top level is facilitating compromises on contentious issues.

This comes at a time when Washington is simultaneously engaging with other trade partners to finalize agreements, adding urgency to the timeline. The alignment between New Delhi and Washington could offer a rare win-win scenario amid a tense global trade environment, particularly as both countries look to strengthen supply chain security and reduce dependence on China.

Implications and Outlook

If finalized, the U.S.-India deal would mark a significant milestone in bilateral economic ties, potentially easing longstanding trade friction while boosting investment flows in key sectors. The deal could also set a precedent for future trade architecture between democracies with overlapping strategic interests.

For now, attention turns to the upcoming visit of the U.S. delegation to New Delhi. Should both sides resolve remaining issues — including digital trade rules, intellectual property, and agricultural safeguards — the announcement of a finalized deal could come before the July 9 deadline. Markets and businesses in both countries are watching closely.

Source: Reuters

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James Whitman

Economic

U.S. job openings increased in April, but layoffs posted their biggest rise in nine months, suggesting that labor market conditions were softening amid a dimming economic outlook because of tariffs.

The Job Openings and Labor Turnover Survey, or JOLTS report, from the Labor Department on Tuesday also showed the number of people quitting their jobs for greener pastures declined by the most since last November. This was consistent with surveys showing consumers becoming less confident about the jobs market.Economists say the on-gain, off-again manner in which President Donald Trump's import duties are being implemented has left businesses in limbo and struggling to plan ahead. The labor market continues to anchor the economy. Despite the rise in April, layoffs remain relatively low.

"We will call this report another indication of stasis in U.S. companies in the face of tariff uncertainty," said Carl Weinberg, chief economist at High Frequency Economics. "Once companies are more certain that bad times are coming, they will start to shed workers."

Job openings, a measure of labor demand, rose 191,000 to 7.391 million by the last day of April, the Labor Department's Bureau of Labor Statistics said. Data for March was revised higher to 7.200 million open positions instead of the previously reported 7.192 million.Economists polled by Reuters had forecast 7.10 million vacancies. April's rise in vacancies was likely a correction following March's sharp decline. Unfilled positions were concentrated in the professional and business services as well as healthcare and social assistance sectors.

Job openings at restaurants and bars dropped 135,000. There were also fewer postings in manufacturing, finance and insurance as well as state and local government education.

Federal government vacancies rose 13,000 despite a hiring freeze implemented by the Trump administration amid cost cutting. The job openings rate rose to 4.4% from 4.3% in March.LAYOFFS RISE

Layoffs increased 196,000, the largest rise since last July, to a still-low 1.786 million. Companies are hoarding workers after difficulties finding labor during and after the COVID-19 pandemic. The layoffs rate inched up to 1.1% from 1.0% in March.

Layoffs increased in the professional and business services, healthcare and social assistance sectors as well as at restaurants and bars. There were also job cuts in construction and manufacturing industries. But there were fewer layoffs in the government sector.

Though job postings increased, companies are generally hesitant to boost headcount. Hiring increased by 169,000 to 5.573 million, driven by construction, professional and business services, hotels and food services businesses. Hiring declined in the retail, finance and insurance sectors.

A U.S. trade court last week blocked most of President Donald Trump's tariffs from going into effect, ruling that the president overstepped his authority. But the tariffs were temporarily reinstated by a federal appeals court a day later, adding to the uncertainty facing businesses.

Americans are staying put in their jobs. The number of people quitting their jobs declined 150,000 to 3.194 million.The quits rate, viewed as a measure of labor market confidence, fell to 2.0% from 2.1% in March, also suggesting subsiding wage inflation.

The Conference Board's labor market differential has narrowed considerably this year. That lack of confidence could be reinforced by May's employment report, which is scheduled for release on Friday.

Nonfarm payrolls likely increased by 130,000 jobs last month after advancing by 177,000 in April, a Reuters survey of economists showed. The unemployment rate is forecast to hold steady at 4.2%, with greater risks of a rise to 4.3%.