Oil markets have responded to two key developments: the announcement of US President Donald Trump’s “Liberation Day” tariffs and decisions made following yesterday’s Organization of the Petroleum Exporting Countries Plus (OPEC+) meeting, which signalled an expected increase of 411,000 barrels per day (bpd) in May supply from eight member countries.
Brent crude fell 4% in early trading on April 4, dropping below US$70 ($93.44) per barrel; a US$5 per barrel correction from earlier levels.
“OPEC+ has made an opportunistic move by boosting supply in May, capitalising on the expected stagnation in non-OPEC production. With potential supply disruptions stemming from sanctions and tariffs — on both sellers and buyers — oil prices are unlikely to stay below US$70 for long,” says Mukesh Sahdev, Rystad Energy’s global head of commodity markets (oil).
Commodities research firm Rystad Energy expects the recent price slide to be short-lived, cushioned by anticipated summer demand and ongoing geopolitical risks.
“At the same time, there’s a clear signal from OPEC+ to uphold compliance and avoid a surplus that could threaten the market’s current backwardation structure,” adds Sahdev. “Future actions will likely hinge on how US sanctions, tariffs or military tensions unfold.”
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During yesterday’s OPEC+ meeting, eight OPEC+ producers (the OPEC-8) — Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria and Oman — confirmed an accelerated crude oil output increase from May.
As per the group's statement, this brings the total output increase to 1.23 million bpd over three months, from May to July.
This adjustment, equivalent to three monthly increments, exceeds the market’s prior expectation of a 135,000 bpd hike for May, as reflected in pre-meeting forecasts.
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This move brings forward a larger volume of supply as part of the ongoing unwinding of the 2.2 million bpd voluntary cuts that began on April 1.
According to an April 4 note by Rystad Energy, the decision signals OPEC+’s confidence in the market’s ability to absorb additional supply, though it introduces new complexities given persistent macroeconomic uncertainties, fluctuating demand signals and geopolitical risks
By opting for an accelerated supply increase, OPEC+ is aiming to restore more barrels to the market at a time when crude prices have faced downward pressure, adds the firm.
“The timing of this decision is particularly notable, as it follows weeks of mixed signals from oil markets, including non-OPEC+ countries increasing production (particularly the US, Brazil and Canada), the US trade war (sanctions and tariffs), China’s lower than expected demand, the Russia-Ukraine ceasefire failure and internal pressure from member states scrambling for higher targets that would match their new capacities,” say Rystad Energy’s analysts.
A key factor in making the OPEC+ strategy work, however, is compliance, they add. “Some members, particularly Kazakhstan, have struggled to stay within their quotas, producing beyond agreed limits. OPEC+ has emphasised the need for compensation.”
On March 3, the OPEC-8 reaffirmed their commitment to compensate for overproduction from January 2024, with updated plans submitted to the OPEC Secretariat by March 20. These plans, frontloaded to address overproduced volumes earlier, aim for full compensation by June 2026.
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If these commitments are not met, the group risks losing credibility, which could lead to instability in both production discipline and market confidence, says Rystad Energy.
The April 3 statement noted that the May hike provides an opportunity to accelerate compensation, particularly for Kazakhstan.
At its core, this decision reflects OPEC+’s ongoing balancing act, according to Rystad Energy. “The group is willing to put more barrels into the market, but only on its own terms. If demand weakens further or external supply grows too quickly, OPEC+ retains the flexibility to slow or reverse production hikes.”
The firm adds: “OPEC+ is still in control, and it will not allow prolonged price drops without taking action.”
Infographics: Rystad Energy
