ADVERTISEMENTCrude oil futures fell sharply after the Organisation of the Petroleum Exporting Countries (OPEC) and its allies announced a larger-than-expected production increase on Thursday, deepening the decline in energy markets due to US President Donald Trump’s tariff announcements. The drop erased all the gains since the US targeted Houthi militants in mid-March.
Brent futures dropped 6.42% to $70.14 per barrel, and West Texas Intermediate (WTI) declined 6.64% to $66.95 per barrel on Thursday. Losses continued during the Friday Asian session, with both benchmark prices nearing their lowest levels since December 2021.
Investors’ fears of an all-out global trade war, as US President Donald Trump declared a “Liberation Day” and announced reciprocal tariffs, compounded the drop in commodity prices, including copper and crude oil, which fell by 4% after the announcement. OPEC’s decision to boost production exacerbated market uncertainties, causing crude prices to fall further.
OPEC Decides to Ramp Up Production
Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman, all key members of OPEC, agreed to increase their oil production by a total of 411,000 barrels per day in May, surpassing the market’s expected increase of 140,000 barrels per day. Additionally, these nations will be compensating for overproduction by reducing their supplies in line with the total of 4.2 million barrels per day.
The increased production, which includes previously planned and additional output, reflects OPEC’s flexibility in response to evolving market conditions and its dedication to maintaining oil market stability. The group noted this decision offers an opportunity for countries to accelerate their compensation for previous overproduction.
The cartel members will reconvene on 5 May to discuss production levels for June.
US Tariffs and Geopolitical Tensions Rekindle Analyst Worries
OPEC+ countries, including Russia, Iran, and Venezuela, face US tariffs and threats from President Trump, which could lead to a reduction in their oil exports, potentially nullifying the planned output increases.
The White House has imposed 25% tariffs on countries importing Venezuelan oil, effective this week. Last week, Trump threatened tariffs of 25% to 50% on Russia’s oil buyers, and warned of “bombing” and the implementation of “secondary tariffs” on Iran—a new form of sanctions that could significantly impact major oil buyers like China and India.
Changes in Venezuelan and Iranian oil exports could affect global supplies. According to the US Energy Information Administration (EIA), Iran’s oil output has been on the rise since 2022, currently at 1.5 million barrels per day, equating to 1.4% of global production. OPEC’s secondary sources report Venezuela’s production reaching 900,000 barrels per day in the first quarter of 2025, with exports to the US at 250,000 barrels per day in January. However, Veniceian crude and fuel exports dropped 11.5% in March compared to February, largely influenced by the latest US sanctions.
