Oil slides on new US ‘Liberation Day’ tariffs, OPEC+ meeting
The move by OPEC+ to boost supply in May is opportunistic and capitalizes on the expected stagnation in non-OPEC production, according to Rystad Energy’s Global Head of Commodity Markets - Oil, Mukesh Sahdev.
New Delhi: Brent crude fell 4 per cent in early trading, dropping below $70 per barrel, a $5 per barrel correction from earlier levels. This is a response to two key developments: the announcement of new US ‘Liberation Day’ tariffs on Wednesday and decisions made following the OPEC+ meeting on Thursday, which signaled an expected increase of 411,000 barrels per day in May supply from eight member countries.The move by OPEC+ to boost supply in May is opportunistic and capitalizes on the expected stagnation in non-OPEC production, according to Rystad Energy’s Global Head of Commodity Markets - Oil, Mukesh Sahdev."With potential supply disruptions stemming from sanctions and tariffs — on both sellers and buyers — oil prices are unlikely to stay below $70 for long. We expect the recent price slide to be short-lived, cushioned by anticipated summer demand and ongoing geopolitical risks," he said.Sahdev also added that there is a clear signal from OPEC+ to uphold compliance and avoid a surplus that could threaten the market’s current backwardation structure and future actions will likely hinge on how US sanctions, tariffs, or military tensions unfold.At the 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 of 411,000 barrels per day (bpd) starting in May 2025.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. 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 1 April.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, according to Rystad Energy.The updated production targets for May set total OPEC-8 output at approximately 30.96 million bpd, with individual country allocations as follows: Algeria at 919,000 bpd, Iraq at 4.05 million bpd, Kuwait at 2.44 million bpd, Saudi Arabia at 9.2 million bpd, UAE at 3.02 million bpd, Kazakhstan at 1.49 million bpd, Oman at 768,000 bpd, and Russia at 9.08 million bpd.Rystad Energy said in a note that 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. 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.
