Oil Prices Plummet Amid OPEC+ Output Surge and Escalating Trade Tariffs

Arabian Post Staff -Dubai

On April 4, 2025, Saudi Arabia led an initiative within OPEC+ to substantially boost oil output by 411,000 barrels per day starting in May. This move aims to penalize member countries like Kazakhstan and Iraq for consistently exceeding production quotas. The decision contributed to an 8% drop in oil prices, with Brent crude falling below $65 per barrel for the first time since 2021.

Concurrently, President Trump intensified trade tensions by imposing tariffs on imports from Canada, China, and Mexico. China responded with a retaliatory 34% tariff on U.S. imports, escalating fears of a global economic slowdown and further pressuring oil prices.

Goldman Sachs revised its 2025 oil price forecasts downward, cutting Brent crude to $69 and West Texas Intermediate to $66 per barrel. JPMorgan raised its global recession probability to 60%, up from 40%, reflecting growing concerns over economic stability.

The surge in supply and escalating trade disputes have led to significant losses in energy stocks. Major oil companies, including Chevron, APA, Occidental Petroleum, and Diamondback Energy, experienced notable declines. The Energy Select Sector SPDR ETF fell nearly 7% on the day and almost 13% for the week.

Analysts suggest that until production is significantly reduced, oil prices may continue to fall. The geopolitical backdrop includes U.S. relations with Saudi Arabia, key to both energy policy and diplomatic efforts related to Russia, Iran, and broader Middle East tensions.

In contrast, natural gas stocks have shown resilience, supported by rising LNG exports and less exposure to OPEC’s dynamics. Companies like EQT, Expand Energy , and Coterra Energy are highlighted as attractive investments due to geographic advantages and favorable valuations.

The current downward trend in oil prices is primarily driven by OPEC+’s decision to increase output and the introduction of U.S. tariffs. Analysts expect the tariffs to curb economic activity and demand for energy, weighing on oil prices. The bank also said higher-than-expected crude supply and a demand squeeze from softer U.S. economic activity and tariff escalation posed downside risks to oil price forecasts.

The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, decided on Monday to increase output for the first time since 2022, further pressuring crude prices. The group will make a small increase of 138,000 barrels per day from April, the first step in planned monthly increases to unwind its nearly 6 million bpd of cuts, equal to almost 6% of global demand.

The larger-than-expected decline in crude stocks supported the downward trend in oil prices, pointing to weakening demand in the U.S. The U.S. Energy Information Administration is expected to announce the official inventory data during the day.

The risks to oil prices remain tilted to the downside with new supply from OPEC+ and non-OPEC producers expected to push the market well into an oversupply. Brent prices on Wednesday fell to their lowest since December 2021 after U.S. crude inventories rose and in the wake of the decision by OPEC+ to increase their output quotas.

Oil prices had already been trading lower in the last few weeks, partly because of expectations that U.S. president Donald Trump could swiftly end Russia’s war in Ukraine. This, in turn, is likely to increase Russian oil output thanks to sanctions relief.

The benchmark previously dropped to $66.77 a barrel, the lowest since November. “The current downward trend in oil prices is primarily driven by OPEC+’s decision to increase output and the introduction of U.S. tariffs,” said Darren Lim, commodities strategist at Phillip Nova. He said another factor was President Donald Trump’s decision to pause all U.S. military aid to Ukraine after his Oval Office clash with President Volodymyr Zelenskiy last week.

Those politics are likely connected with the wheeling and dealing of Donald Trump, referring to the U.S. president’s calls for lower oil prices. U.S. tariffs of 25% on imports from Canada and Mexico took effect at 12:01 a.m. EST on Tuesday, with 10% tariffs on Canadian energy, while tariffs on imports of Chinese goods were increased to 20% from 10%. Analysts expect the tariffs to curb economic activity and demand for energy, weighing on oil prices.

The bank also said higher-than-expected crude supply and a demand squeeze from softer U.S. economic activity and tariff escalation posed downside risks to oil price forecasts. Chinese demand is also down, with a period of refinery maintenance looming, said Josh Callaghan, head of crude derivatives at Arrow Energy Markets.

Oil prices declined for a third day on Wednesday, as investors worried about OPEC+ plans to proceed with output increases in April, and U.S. President Donald Trump’s tariffs on Canada, China, and Mexico escalated trade tensions. Brent futures fell $1.02, or 1.44%, to $70.02 a barrel by 1149 GMT. U.S. West Texas Intermediate crude declined $1.33, or 1.95%, to $66.93 a barrel.

Also published on Medium.

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