Crude prices are expected to fall in the long term as Saudi Arabia and other big oil producers move to regain market share

The latest production boost by OPEC+ countries will likely pressure U.S. shale drillers even more.

The largest group of oil-producing nations agreed over the weekend to sharply increase crude production for the third month in a row, a move intended to reassert control over the market by driving oil prices lower.

OPEC+ — the Organization of the Petroleum Exporting Countries and its allies — announced Saturday that it will increase production by 411,000 barrels a day in July, following similar hikes in May and June, in a move to punish countries that are over-producing oil, such as Iraq and Kazakhstan, and for oil-producing nations like Saudi Arabia to win back market share from U.S. shale drillers.

But West Texas Intermediate front-month futures jumped around 3% late Sunday, driven by geopolitics, as analysts said the production hike had largely been factored in. Dow Jones Industrial Average futures declined about 0.3% on Sunday night, as did S&P 500 futures and Nasdaq-100 futures.

“Oil is trading as if it has just remembered that geopolitics exists,” Stephen Innes, managing partner at SPI Asset Management said in a note late Sunday, saying investors are looking past the production hike and focusing on Ukraine’s latest offensive against Russian air bases and infrastructure, and the potential impact on Russian oil production. “Moscow has been provoked on a strategic level, and markets should brace for a forceful Russian retaliation,” he wrote.

The production increases come after OPEC+ voluntarily cut output totaling 2.2 million barrels a day starting in January 2024 to support stability and balance in the oil market. It began phasing out those cuts by gradually boosting production in April, then started tripling the pace of production in May.

In a statement Saturday, OPEC+ said it was reaffirming its ”commitment to market stability on current healthy oil market fundamentals and steady global economic outlook.”

The latest move is likely to hurt U.S. oil producers, who are already being pressed by high costs of drilling and lower oil prices.

“The cartel, once laser-focused on price defense, has veered into volume-first territory, weaponizing barrels to discipline quota cheats, squeeze U.S. shale, and curry favor with Washington, all while dancing on the edge of its own fiscal cliff,” Innes said in a separate note earlier Sunday. “If Riyadh’s playing the long game, they’re betting the price dip today is the cost of cartel control tomorrow.”

Violeta Todorova, senior research analyst at Leverage Shares, an exchange-traded product provider, said last week that she believes the production cuts could send crude prices tumbling 10% lower than their current prices, as MarketWatch reported Friday.

Still, little immediate impact is expected. “We don’t expect a negative market reaction to this announcement: the increase was already largely priced in, and the market could shift focus to other emerging bullish factors, such as the risk of supply disruptions in Libya and Canada, and increased geopolitical risk following the IAEA report on the Iranian nuclear program,” analysts at Jeffries said in a note Sunday.

Oil prices fell slightly Friday, but gained overall in May. The front-month July WTI crude contract settled at $60.79 a barrel, up 4.4% for the month, according to Dow Jones Market Data. Global benchmark Brent crude for July delivery ended at $63.90, up 1.2% for the month.

OPEC+ said it will meet July 6 to decide on its August production levels.