From Investing.com: 2025-04-04 04:41:00

Oil prices have dropped due to concerns over demand from tariffs and an unexpected supply increase from OPEC+. Forecasts for oil prices have been lowered for the year, with downside risks still present. Prices are below $70/bbl, the largest sell-off since August 2022. OPEC+ decided to increase supply by 411k b/d in May, surprising the market after a video conference. The group cited a positive market outlook, despite demand uncertainty.

The decision to increase supply may be influenced by US President Trump’s stance on Iran and Venezuela. Trump’s pressure on Saudi Arabia to boost supply may have played a role. The move could also be a response to members exceeding production targets. The increase in supply for May leaves the oil balance better supplied for the second quarter.

This supply increase could lead to a surplus in the market, with uncertainty surrounding future production levels. Demand estimates have been revised lower, with potential for further decreases due to reciprocal tariffs. Average Brent forecasts for 2025 have been reduced, with a modest deficit expected in the second and third quarters. Sanctions remain an upside risk, particularly with Venezuelan and Iranian oil supplies.

Lower oil prices may hinder US production growth, as current price levels provide little incentive for producers to increase drilling activity. Backwardation in the market and the need for higher prices to profitably drill new wells could impact domestic production. Trump’s desire for increased US oil production may require higher oil prices to incentivize producers.



Read more at Investing.com: Oil Prices Plunge Due to Tariff-Related Demand Worries and Increased OPEC+ Supply