Shares in Shell PLC (LSE:SHEL, NYSE:SHEL) and BP PLC (LSE:BP.) were the main weights dragging on the FTSE 100 on Monday morning, following a guidance downgrade and an Opec meeting over the weekend.
On Saturday, the eight oil-producing countries of the Opec+ group announced a surprise decision to bring forward four months of production, in other words 548,000 barrels of oil per day, instead of the anticipated three-month or 411,000 increase.
This decision means that nearly 80% of the previously announced 2.2 million barrels-a-day restriction is back in the market, with members also saying they will do the same at their September meeting, meaning the 2023 cuts will be fully restored a year earlier than initially planned.
This was followed by Shell announcing on Monday morning that its own production levels for the second quarter would be lower than the first quarter, leading to its shares falling 2.5%.
BP shares fell 1.6%, while other continental European oil major saw their shares fall too, including a 1.5% decline for France's TotalEnergies.
Analysts at RBC Capital said that while Opec officials maintain they can still pause or reverse the production increase, "we sense no real anxiety at this stage from decision makers about the price path from April onwards".
"While a lot of ink has been spent on Saudi Arabia’s ability to weather a more muted price environment, Kuwait is also moving forward with an ambitious plan to pare back expensive subsidies and pursue other key fiscal reforms."
Ipek Ozkardeskaya, market analyst at Swissquote Bank, added: "Given that the cartel has shifted from a strategy of supporting oil prices to one focused on regaining market share, there’s little reason for them to hold that strategy in place any longer.
"Funny enough, the reason for faster oil restoration is ‘a steady economic outlook and current healthy market fundamentals.’ But of course, that view is questionable in the context of intensifying global trade tensions, which have led several leading institutions – including the OECD and World Bank – to revise their growth forecasts lower."