Oil prices plunged more than $2 a barrel in Asian trade on Monday as OPEC+ prepared to further accelerate oil output increases, stoking concerns about more supply coming into a market clouded by an uncertain demand outlook.

Brent crude futures fell $2.21, or 3.61%, to $59.08 a barrel by 0653 GMT while U.S. West Texas Intermediate crude was at $56.00 a barrel, down $2.29, or 3.93%.

Both contracts touched their lowest levels since April 9 at the open on Monday after OPEC+ agreed to accelerate oil output increases for a second straight month, increasing output in June by 411,000 barrels per day (bpd).

June's increase from the eight increases would bring the combined total for April, May and June to 960,000 bpd, a 44% reduction from the 2.2 million bpd of cuts agreed since 2022, according to Reuters calculations.

"OPEC+'s decision on May 3 to raise production quotas by 411,000 bpd for June adds to market expectations that the global supply/demand balance is moving toward surplus," Tim Evans, founder of Evans on Energy, said in a note.

The group could end its voluntary cuts entirely by the end of October if members do not improve compliance with their production quotas, OPEC+ sources told Reuters.

OPEC+ sources said Saudi Arabia was pushing OPEC+ to speed up the rollback of previous production cuts to punish fellow members Iraq and Kazakhstan for not complying with their production quotas. The six-month Brent crude spread has moved into contango at 11 cents a barrel for the first time since December 2023, with oil cheaper now than in future months, reflecting expectations that the market is well supplied.

Barclays and ING have also lowered their Brent crude forecasts following the OPEC+ decision.

Barclays lowered its Brent crude forecast by $4 to $66 a barrel for 2025 and by $2 to $60 a barrel for 2026, while ING expects Brent to average $65 this year, down from $70 previously.

"We now expect OPEC+ to end its additional voluntary adjustments in October 2025 but also expect slightly slower U.S. oil production growth," Barclays analyst Amarpreet Singh said in a note.

The net impact of higher OPEC+ output and lower U.S. output has raised Barclays' 2025 supply estimates by 290,000 bpd for 2025 and by 110,000 bpd for 2026, it said.

ING analysts led by Warren Patterson said the global oil balance is expected to move deeper into surplus through 2025.

"The oil market was already facing significant demand uncertainty amid tariff risks. This change in OPEC+ policy adds to the supply-side uncertainty," they added.

Meanwhile, tensions flared in the Middle East after Israeli Prime Minister Benjamin Netanyahu vowed to retaliate against Iran after the Tehran-backed Houthi group fired a missile that landed near Israel's main airport.

Iranian Defense Minister Aziz Nasirzadeh said on Sunday that Tehran would retaliate if the United States or Israel attacked. (Newsmaker23)

Source: Reuters