Oil Majors Face OPEC Output Hike, Not U.S. Tariffs

The oil industry is grappling with a significant shift in market dynamics as OPEC+ announced a substantial increase in oil production, which is expected to put downward pressure on global oil prices. This move, coupled with the ongoing trade tensions and tariffs imposed by the U.S., has created a complex landscape for oil majors like Eni. Guido Brusco, Eni's Natural Resources Chief Operating Officer, recently highlighted that the primary challenge for the company is not the U.S. tariffs but the increased supply from OPEC+.



The OPEC+ decision to increase oil production by 411,000 barrels a day in May 2025 is a significant policy shift that could have far-reaching implications for the global oil market. This move comes at a time when the U.S. has imposed tariffs on a wide range of goods, including those from China, Mexico, and Canada. While the tariffs have sparked concerns about potential retaliatory measures and their impact on global trade, the immediate threat to oil majors appears to be the increased supply from OPEC+.

The decision by OPEC+ to boost production is likely to lead to an oversupplied market, which could drive down oil prices. This scenario is exacerbated by the ongoing trade tensions, which have created uncertainty in the global economy. As Ole Hansen, head of commodities strategy at Saxo Bank A/S, noted, "First recession and demand fears driven by Trump’s tariff bazooka, and now the prospect for rising supply from OPEC. Traders will once again turn their attention to the risk of an oversupplied market."

For oil majors like Eni, the increased supply from OPEC+ poses a significant challenge. The company, which is one of the largest importers of natural gas in Italy, has been investing heavily in Africa, both in traditional exploration and production and in new low-carbon projects. Eni's strategy is to diversify its operations and reduce its reliance on volatile oil prices. As Brusco noted, "Fields are declining but 80% of global energy demand is still based on fossils, so while cleaner sources are being developed it's necessary to manage oil and gas reduction... particularly in Africa where the population is growing and development is accelerating."

Eni's investment in Africa is part of a broader strategy to adapt to the changing market conditions. The company is rolling out multi-billion investments to guarantee exports to Italy, serve the African market, and get ready to ship more gas to Europe. This diversification strategy helps Eni mitigate the risks associated with fluctuating oil prices by expanding its operations in regions with growing energy demand.

In addition to its investments in Africa, Eni is also focusing on energy transition projects, such as renewables and farming in Africa to produce agricultural feedstock for its biofuel business. This shift towards renewable energy sources and biofuels aligns with the global trend towards cleaner energy and positions Eni to be less dependent on volatile oil prices. Eni's investment in the Baleine project in Ivory Coast, which aims to create the first gas and oil field with net-zero emissions in Africa, is a prime example of this strategic adaptation.

The OPEC+ output hike, combined with the U.S. tariffs, could lead to lower oil prices, increased market volatility, and a potential shift in investment strategies towards renewable energy. These factors could significantly impact the energy sector's long-term outlook and influence how investors allocate their capital. As the market continues to evolve, oil majors like Eni will need to adapt their strategies to navigate the challenges posed by the increased supply from OPEC+ and the ongoing trade tensions.