Crude Oil Prices Plunge to Four-Year Lows Amid Trade Wars and OPEC+ Chaos

The June WTI crude oil contract closed at $62.05 per barrel on June 15—a decline of $0.97 from the previous session—marking a stark reversal from its 2025 high of $72/bbl in early January. This precipitous drop reflects the confluence of geopolitical tensions, supply overhang, and macroeconomic headwinds reshaping global energy markets.

Trade Tensions: The Elephant in the Tanker

The U.S.-China trade war, which intensified in April 2025, has become the single largest driver of oil market instability. After the U.S. imposed 10% tariffs on all imports, China retaliated with 34% tariffs on ethane and LPG, exacerbating fears of a demand slump. The EIA’s downward revision of global oil demand growth to 730 kb/d—400 kb/d less than its initial forecast—underscores the fragility of consumption.

Meanwhile, the IMF’s warning that a 1% GDP contraction could slash demand by 500 kb/d has fueled a “bumpy ride” for oil prices. Brent crude, a benchmark for global markets, fell to a four-year low of $60/bbl in early April before rebounding slightly to $65/bbl as some tariff deadlines were delayed. However, the respite was short-lived.

OPEC+: A Fractured Cartel

OPEC+’s credibility as a supply manager is eroding. Despite agreeing to lift output targets by 411 kb/d in May, chronic overproduction by key members has outpaced agreed quotas. Kazakhstan, for instance, surged to a record 1.8 mb/d after the Tengiz oilfield expansion—a 390 kb/d overproduction—while refusing to comply with OPEC+ rules. The UAE and Iraq also exceeded their quotas by 350 kb/d and 440 kb/d, respectively.

Even voluntary cuts by Saudi Arabia and others have done little to offset the oversupply. Analysts estimate that non-OPEC+ supply growth will outpace demand in 2025 by 190 kb/d, with Brazil, Guyana, and Canada adding 240 kb/d collectively. The cartel’s May 5 meeting will be critical, but without compliance, prices could remain under pressure.

U.S. Shale: Breakeven Blues

U.S. shale producers are caught in a vise. Brent prices below $65/bbl now fall below the breakeven cost of $65/bbl for many light tight oil wells, per the Dallas Fed’s Energy Survey. Combined with rising drilling costs and infrastructure bottlenecks—such as the Keystone pipeline shutdown—U.S. supply growth for 2025 has been revised down to 280 kb/d, a 150 kb/d cut from earlier estimates.

Diamondback Energy and peers are now questioning the viability of federal shale policies, while investors grow wary of capital-intensive projects. The pain is reflected in equity markets:

Geopolitical Risks and Inventory Pressures

Beyond trade wars, geopolitical risks linger. Venezuela’s production remains constrained by U.S. sanctions and military instability, while Russia’s Urals crude faces a steep discount as EU embargoes force rerouting to Asia. Meanwhile, Libya’s delayed production increases due to political strife add to the supply uncertainty.

On the demand side, China’s Q1 GDP growth slowed to 4.5%—its weakest since 1990—dragging crude imports down 8% year-over-year. Emerging markets like India and Southeast Asia are growing modestly, but subsidy reforms could curb consumption further.

Inventory Overhang and Technical Volatility

Global oil inventories have swelled, with observed stocks rising by 21.9 mb in February and preliminary March data showing further builds. The “oil on water” phenomenon—floating reserves awaiting buyers—adds to the oversupply narrative.

Algorithmic trading has also amplified volatility. In March, a flash crash sent Brent prices tumbling 7% intraday as high-frequency traders triggered stop-loss orders. Such technical factors could continue to unsettle markets.

What’s Ahead?

The EIA now forecasts a 2025 Brent average of $68/bbl—down from $74/bbl—and a 2026 average of $61/bbl. Stratas Advisors suggests prices could rebound to $67–68/bbl if trade tensions ease, but risks remain skewed to the downside.

The May 5 OPEC+ meeting is pivotal. Without meaningful compliance or deeper cuts, the supply glut could deepen. Meanwhile, the U.S.-China trade negotiations, set to resume in late June, hold the key to demand stability.

Conclusion: A Bear Market for Bulls

The $62/bbl price tag for June WTI reflects a market drowning in oversupply and uncertainty. With OPEC+’s fractured discipline, U.S. shale’s financial fragility, and a global economy teetering on slowdown, the path to $70/bbl—and beyond—is fraught with obstacles.

The EIA’s revised demand forecast and the 190 kb/d surplus between non-OPEC+ supply and demand growth highlight the structural imbalance. Unless geopolitical risks escalate—such as a sudden disruption in Middle Eastern exports—prices may remain anchored below $70/bbl for the foreseeable future. Investors would be wise to brace for prolonged volatility, with the June contract’s close at $62.05 serving as a stark reminder of the risks ahead.