Oil Prices Plunge 4% as OPEC+ Cranks Up Output Amid Global Trade Turmoil
2min read The oil market suffered its steepest decline in years in April-May 2025, with prices falling nearly 4%—a drop exacerbated by OPEC+’s sudden acceleration of production increases and a perfect storm of trade wars, overproduction, and recession fears. Brent crude plummeted to a four-year low of $61.29 per barrel, while U.S. crude futures sank to $55.80, marking a stark reversal from the cartel’s traditional role as a price stabilizer.
The OPEC+ Production Gamble
In May 2025, eight OPEC+ members—including Saudi Arabia and Russia—agreed to boost output by 411,000 barrels per day (bpd) for May, tripling their initial planned increase. A second 411,000 bpd hike followed in June, totaling 822,000 bpd of added supply by mid-2025. These moves were framed as a gradual rollback of voluntary cuts agreed in December 2024, but analysts saw a deeper strategy: punishing rogue producers like Kazakhstan (which overproduced by 422,000 bpd in March) and Iraq, while aligning with U.S. President Donald Trump’s push for lower oil prices ahead of his Middle East visit.
Trade Wars and the Demand Destruction
The oil price collapse was not solely OPEC’s doing. The U.S. imposition of 10% tariffs on global imports, coupled with China’s retaliatory measures—including 34% tariffs on U.S. goods—created a “double whammy” for oil demand. goldman sachs slashed its 2025 Brent forecast to $63, citing 400,000 bpd of demand destruction due to weaker global GDP growth. JPMorgan raised recession odds to 60%, further depressing expectations for industrial and transportation fuel use.
The Overproduction Tsunami
Even before the May hikes, OPEC+ members were already flooding markets. Kazakhstan’s output hit a record 1.8 million bpd in March—390,000 bpd above its quota—due to the Tengiz oilfield expansion. Iraq and the UAE also exceeded targets, creating a 1.2 million bpd overhang. This supply glut, combined with 920,000 bpd of non-OPEC+ growth (led by Brazil and Canada), pushed global inventories higher, despite already elevated stockpiles.
Market Chaos and Energy Stocks
The sell-off spilled into equities. The S&P 500 Energy Index tumbled 7.2% in its worst single-day drop since 2023, as traders dumped shares of exploration firms like Apache Corp. (APA) and Diamondback Energy (FANG). Oilfield services giant Halliburton (HAL) lost 6% of its value, reflecting fears of prolonged price weakness.
Geopolitical Crosscurrents
Saudi Arabia’s leadership role was on full display. The kingdom used its 5 million bpd spare capacity to signal dominance, while courting Trump’s support through price cuts. However, the strategy risked destabilizing OPEC+ cohesion. Analysts warned that if prices dip below $65/bbl—the breakeven point for many U.S. shale producers—the cartel might face another supply war.
The Bottom Line: Oil’s Volatile Future
The 4% price drop was no accident. OPEC+’s shift toward market share over price stability, compounded by U.S.-China trade tensions and recession risks, has created a new paradigm: lower for longer. With spare capacity exceeding 5 million bpd and demand growth downgraded to just 0.9 million bpd in 2025, traders are bracing for further declines.
In conclusion, the April-May oil rout underscores a fractured market: overproducing members, geopolitical brinkmanship, and collapsing demand have colluded to sink prices. Investors should prepare for volatility as OPEC+ navigates its delicate balancing act—and as global trade disputes show no signs of resolution. The path to $60/bbl and beyond is now firmly in sight.
