Crude oil futures slumped to near multi-year lows after the Organisation of the Petroleum Exporting Countries (OPEC) and its allies announced a larger-than-expected production increase on Thursday, compounding the Trump tariff-driven sell-off in energy markets. The decline erased all the geopolitical risk-driven gains since the US struck Houthi militants in mid-March.
Brent futures fell 6.42% to $70.14 per barrel, while West Texas Intermediate (WTI) declined 6.64% to $66.95 per barrel on Thursday. Both benchmark prices extended losses during Friday’s Asian session, nearing their lowest levels since December 2021.
OPEC’s decision followed US President Donald Trump’s “Liberation Day” announcement of reciprocal tariffs, which rattled financial markets. Investors feared the measures could spark an all-out global trade war, tipping the world economy into recession. Growth-sensitive commodities, including copper and crude oil, were already under pressure, with oil prices falling by 4% after the announcement. The decision by eight OPEC members to raise output exacerbated the fragile sentiment, driving crude prices lower. Notably, the White House confirmed that oil, gas, and refined products were exempt from the new tariffs.
OPEC to hike production
Eight key members of the OPEC group, including Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman, agreed to increase their joint oil output by 411,000 barrels per day in May, speeding up their unwinding of the production cuts. “This comprises the increment originally planned for May in addition to two monthly increments,” stated OPEC’s official website.
The increase is well above the market estimated 140,000 barrels per day next month. In April, the oil producer cartel is already set to increase output by 135,000 barrels per day after months of delay in easing its voluntary oil production cuts of 2.2 million barrels per day. Market participants expected the organization to maintain a similar volume of production hikes in May.
“The gradual increases may be paused or reversed subject to evolving market conditions. This flexibility will allow the group to continue to support oil market stability,” the organisation added. “The eight OPEC+ countries also noted that this measure will provide an opportunity for the participating countries to accelerate their compensation.” Some members are required to reduce supplies to compensate for overproduction compared to their output targets, totalling 4.2 million barrels per day. Kazakhstan, the United Arab Emirates, Nigeria, and Gabon have been identified s countries exceeding their output targets in recent months.
The eight cartel members will meet on 5 May to decide on June production levels.
Geopolitical tensions remain a bullish factor
However, Trump’s tariff threats against key OPEC+ members, including Russia, Iran, and Venezuela, may reduce their supplies, potentially offsetting the planned output increases.
Trump imposed 25% tariffs on countries importing Venezuelan oil, effective this week. Last week, he also threatened to impose tariffs of 25% to 50% on Russia’s oil buyers and warned of “bombing” and the implementation of “secondary tariffs” on Iran. These “secondary tariffs” represent a new form of sanction through import levies, with China and India—major buyers of oil from these countries—likely to be significantly affected.
Potential reductions in Venezuelan and Iranian oil exports could be material to global supply. According to the US Energy Information Administration (EIA), Iran’s oil output has been rising since 2022, currently reaching 1.5 million barrels per day, equivalent to 1.4% of global production. According to OPEC’s secondary sources, Venezuela’s production hit 900,000 barrels per day in the first quarter of 2025, with exports to the US reaching 250,000 barrels per day in January. Reuters reported that Venezuelan crude and fuel exports fell 11.5% in March compared to February, largely due to the latest US sanctions.