OPEC+ ups supply again: markets rattle amid recession fears and weak oil demand
Pranjal Chandra | May 05, 2025, 21:10 IST
OPEC+ ups supply again: markets rattle amid recession fears and weak oil demand
Image credit : TIL Creatives
OPEC+ has escalated crude oil production for the second consecutive month, adding over 800,000 bpd to the market and exceeding forecasts. This move triggered a drop in U.S. crude futures and amplified recession anxieties amid rising protectionism. Energy firms are recalibrating expectations as oilfield investment faces headwinds due to oversupply concerns.
In a surprising yet increasingly strategic move, OPEC+ announced its second consecutive monthly production hike, shaking global oil markets and stirring recession anxieties across economies already on edge. On Saturday, the group of eight key producers, led by Saudi Arabia, agreed to ramp up crude output by another 411,000 barrels per day (bpd) in June mirroring a similar increase in May.
With these back-to-back hikes, OPEC+ is set to add more than 800,000 bpd of supply to the market, a figure that far outpaces earlier forecasts. Investment bank Goldman Sachs, for example, had projected a modest 140,000 bpd increase in June. The group's actual decision reflects a growing intent to assert pricing influence and possibly reclaim market share amid shifting global energy dynamics.
The market response was swift. U.S. crude futures dropped over 2.6% Monday morning, falling $1.55 to $56.74 a barrel, while global benchmark Brent crude slipped $1.45, or 2.37%, settling at $59.84 per barrel. With this decline, oil prices have now shed about 20% since the start of 2025, amplifying concerns across energy and financial sectors.
April marked the steepest monthly drop in crude prices since 2021, driven by a potent mix of supply-side expansion and weakening demand expectations. Much of the latter stems from mounting fears that U.S. President Donald Trump's new tariff regime could spark a global slowdown.
The timing of OPEC+’s production decision has raised eyebrows. Many analysts interpret the move as a gamble against declining demand especially risky as global economies teeter under the weight of rising protectionism. Trump’s tariff announcements have already shaken investor confidence, fueling fears that a downturn could suppress oil demand further in the months ahead.
Daan Struyven, Goldman Sachs' head of oil research, cautioned in a recent note that “high spare capacity and high recession risk skew the risks to oil prices to the downside.” The bank subsequently lowered its 2025 forecast for U.S. crude by $3, down to $56 per barrel.
The bearish sentiment is echoing across oilfield service companies and energy giants alike. Firms like Baker Hughes and SLB are recalibrating their expectations for 2025, with CEOs warning that spending on exploration and production is likely to drop sharply. “The prospects of an oversupplied oil market, rising tariffs, uncertainty in Mexico, and activity weakness in Saudi Arabia are collectively constraining international upstream spending levels,” Baker Hughes CEO Lorenzo Simonelli said during the company’s Q1 earnings call.
This pullback has ripple effects for the broader energy sector. Chevron and ExxonMobil, two of the largest U.S. oil majors, both reported lower first-quarter earnings year-over-year largely due to the persistent slump in crude prices.
For now, OPEC+ appears willing to take the risk of flooding the market, potentially aiming to pressure higher-cost producers or preempt geopolitical realignments in global oil trade. But the gamble is not without peril. If global demand continues to erode amid recession fears, even OPEC+'s influence may not be enough to prevent a prolonged bear market in oil.
As the world watches prices tumble and policy tensions mount, the coming months will test whether OPEC+’s bold supply strategy stabilizes or further destabilizes a fragile global energy landscape.
With these back-to-back hikes, OPEC+ is set to add more than 800,000 bpd of supply to the market, a figure that far outpaces earlier forecasts. Investment bank Goldman Sachs, for example, had projected a modest 140,000 bpd increase in June. The group's actual decision reflects a growing intent to assert pricing influence and possibly reclaim market share amid shifting global energy dynamics.
U.S. oil futures tumble as supply grows
April marked the steepest monthly drop in crude prices since 2021, driven by a potent mix of supply-side expansion and weakening demand expectations. Much of the latter stems from mounting fears that U.S. President Donald Trump's new tariff regime could spark a global slowdown.
Economic warning signs flash red
Daan Struyven, Goldman Sachs' head of oil research, cautioned in a recent note that “high spare capacity and high recession risk skew the risks to oil prices to the downside.” The bank subsequently lowered its 2025 forecast for U.S. crude by $3, down to $56 per barrel.
Oilfield investment faces headwinds
This pullback has ripple effects for the broader energy sector. Chevron and ExxonMobil, two of the largest U.S. oil majors, both reported lower first-quarter earnings year-over-year largely due to the persistent slump in crude prices.
Strategic gamble or market misstep?
As the world watches prices tumble and policy tensions mount, the coming months will test whether OPEC+’s bold supply strategy stabilizes or further destabilizes a fragile global energy landscape.