Crude Chaos: OPEC+ Infighting and U.S. Economic Headwinds Drive Oil to Four-Year Low

The global oil market faces unprecedented turmoil as Brent crude prices plummet to a four-year low of under $60/barrel, driven by OPEC+’s internal fractures, surging supply, and a weakening U.S. economy. The cartel’s inability to enforce production discipline and escalating trade tensions have created a perfect storm for oil prices, leaving investors scrambling to navigate the volatility.

The OPEC+ Crisis: Overproduction and Infighting

At the heart of the collapse lies OPEC+’s crumbling cohesion. Despite agreeing to a May 2025 production increase of 411,000 barrels per day (bpd), compliance failures have rendered the decision toothless. Key members like Iraq, Kazakhstan, and the UAE have repeatedly exceeded their quotas by hundreds of thousands of barrels daily, with no meaningful consequences. For instance, Kazakhstan’s output hit a record 1.8 million bpd in March 2025—390,000 bpd above its OPEC+ allocation—citing infrastructure risks at foreign-operated fields like Tengiz. Iraq and the UAE similarly overproduced by 440,000 bpd and 350,000 bpd, respectively, prioritizing short-term revenue over collective stability.

Worse still, OPEC+’s “compensatory cuts” aimed at offsetting this excess—totaling 378,000 bpd for May—have failed to materialize. Without enforcement, the net production increase for May 2025 was a mere 30,000 bpd, a far cry from the headline 411,000 bpd figure. The cartel’s credibility is now on life support, with analysts warning that unresolved compliance gaps could push prices below $60/bbl permanently.

U.S. Economic Headwinds and Trade Wars

Adding to the pressure is the U.S. economy’s slowing growth, exacerbated by 145% tariffs on Chinese imports. These trade disputes have slashed global oil demand forecasts to 730,000 bpd growth in 2025, down 300,000 bpd from earlier estimates. The U.S. shale sector, once a price floor for oil, has also faltered. Despite low prices, U.S. oil production growth was revised downward to 490,000 bpd for 2025—150,000 bpd below prior projections—as producers grapple with tariff-driven cost hikes and investor skepticism.

This data underscores the tight link between economic health and oil demand, with U.S. GDP growth slowing to 1.2% in Q1 2025—a critical drag on consumption.

Market Implications: A Bearish Outlook

The combined effect of oversupply and weak demand has sent shockwaves through the energy sector. Brent crude, now trading near $65/bbl, is perilously close to its four-year low. Analysts like Goldman Sachs and JPMorgan are pessimistic: Goldman forecasts an average of $63/bbl for 2025, while JPMorgan sees prices dipping to $58/bbl in 2026.

Investors in energy equities face a stark choice. Take ExxonMobil (XOM), which has underperformed the S&P 500 by 12% since 2022 as oil prices stagnate.

The disconnect between Exxon’s valuation and oil prices signals a broader loss of faith in the sector’s profitability unless prices rebound.

The Path Forward: Can OPEC+ Save Itself?

The cartel’s survival hinges on two factors: enforcing compliance and reducing non-OPEC+ supply growth. Saudi Arabia, the de facto leader, has signaled its willingness to use its 3 million bpd spare capacity to discipline free-riders—even if it means short-term pain. The kingdom’s fiscal breakeven price of $96/bbl for 2025, however, leaves little room for error.

Meanwhile, non-OPEC+ producers like Brazil and Canada threaten to outpace demand with 1.3 million bpd of new supply in 2025—a figure that could worsen if OPEC+ remains fractured.

Conclusion: A Volatile Road Ahead

The oil market’s downward spiral in May 2025 reflects a systemic failure of OPEC+ to act as a cohesive force. With prices hovering near $65/bbl and compliance gaps widening, the risks of a deeper collapse are acute. Investors must prepare for prolonged volatility, weighing the following:

1. OPEC+ Compliance: If overproducers like Iraq and Kazakhstan fail to curb output by June, prices could drop below $60/bbl.
2. Geopolitical Risks: U.S.-China trade talks and potential U.S. sanctions on Russia could either alleviate oversupply or worsen it.
3. Demand Recovery: A rebound in U.S. and Chinese GDP growth—or a surprise OPEC+ cut—might stabilize prices, but neither seems likely in the near term.

For now, the writing is on the wall: oil’s four-year low is no fluke. Until OPEC+ restores discipline or demand surges, investors should brace for more pain—or seek opportunities in sectors insulated from the slump.

As stocks near 2.85 billion barrels, the data leaves little doubt: the market is oversupplied, and OPEC+’s internal strife has made a correction nearly impossible.