Oil Prices Plunge 5% Weekly Amid Trump Tariffs, OPEC+ Production Surge

Oil prices are anticipated to experience a weekly decline exceeding 5%, primarily due to the imposition of tariffs by former U.S. President Donald Trump and the unexpected increase in production by the OPEC+ alliance. These factors have collectively unsettled the market, leading to a significant drop in oil prices.

On the previous trading day, Brent crude oil fell by 1.9% to $68.77 per barrel, while West Texas Intermediate (WTI) crude oil declined by 2.1% to $65.55 per barrel. This downward trend was exacerbated by the OPEC+ decision to increase oil production by more than anticipated in May. The alliance agreed to boost daily oil production by 411,000 barrels, a move that caught many market participants off guard and contributed to the widening of the price decline.

The tariffs announced by Trump added to the market's volatility, as they were seen as a potential threat to global trade and economic stability. The combination of these tariffs and the increased oil production by OPEC+ has created a perfect storm for oil prices, leading to a significant weekly decline. Analysts from BMI Research noted that longer-term contracts showed signs of weakness, with the price differentials for six-month and twelve-month contracts narrowing significantly.

While the tariffs did not directly target oil and natural gas, market participants expressed concern that these policies could drive up inflation and hinder global economic growth, ultimately impacting oil demand. The planned increase in production by OPEC+ and non-OPEC producers until 2025 is expected to exacerbate this impact, further pressuring oil prices.

Despite the fragile state of the global oil market, which is already under pressure from escalating trade tensions, many OPEC+ member countries are in need of higher oil prices to balance their national budgets. However, the alliance is also facing external pressure from Trump to lower oil prices, adding to the complexity of the situation. The market's reaction to these developments underscores the sensitivity of oil prices to geopolitical and economic factors. As the situation continues to evolve, market participants will be closely monitoring any further developments that could impact oil prices.