Oil prices slumped yesterday after OPEC+ countries announced a sharp production increase despite oversupply concerns and growing fears that US President Donald Trump’s trade war could weaken demand.
Saudi Arabia, Russia and six other members of the oil cartel announced over the weekend an output increase of 411,000 barrels a day for next month, a month after a similar move had already caused prices to fall.
The price of crude has also been sliding because of fears of a global economic slowdown on the back of Trump’s tariff onslaught.
Photo: AFP
The OPEC+ move “confirms a stark turnaround away from the production cuts that have persisted since 2022,” Deutsche Bank AG said in a research note.
Oil prices fell almost 4 percent before paring back some losses. Brent, the international benchmark, was trading at just under US$60 per barrel at about 7:15am GMT.
Some analysts pointed to pressure from Trump to lower prices and expectations of declining Iranian oil exports amid tighter sanctions as possible reasons for the unexpected move.
Others said the motivation was unclear.
“The weekend news wasn’t a shocker, but the reasons behind the move remain uncertain,” Swissquote Bank Ltd senior analyst Ipek Ozkardeskaya said.
“The official communication says the group is bringing barrels back to the market because, fundamentals are healthy and inventories are low,” Ozkardeskaya said.
“Yet global growth expectations have been crumbling due to a heated trade war between the US and the rest of the world, and rising output only worsens oversupply concerns. So the real reason must be something else,” she added.
Some people said that the Saudis were “punishing” OPEC members who had not complied fully with the previous policy of cutting production, Ozkardeskaya said.
Other theories include that Trump wants to lower oil prices to hurt Russian finances and speed up the end of the Ukraine war, or that Riyadh wants to push out US shale businesses and increase its market share.
“We don’t know for sure. The exact motive remains unclear,” Ozkardeskaya said.
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