Oil prices slid to their lowest level of the year on Monday after OPEC and its allies reaffirmed plans to gradually increase crude production starting in April. The move, aimed at easing supply restrictions that have propped up prices, introduces the risk of oversupply in the global market.
The cartel, known as OPEC+, announced it would raise output by 2.2 million barrels per day—roughly 2% of global demand—over the coming months. While this decision could offer relief to consumers by lowering energy costs, it also threatens the profits of oil producers and the economies that depend on them.
Market Reaction and Profitability Concerns
In response to the announcement, U.S. oil prices settled at $68.37 per barrel, marking a 2% decline. While this price point remains high enough for most U.S. drillers to continue operating profitably, a drop below $60 per barrel could put pressure on many producers, particularly those engaged in higher-cost drilling operations.
The decision to boost production comes after months of speculation. OPEC+ had initially signaled these plans in December, but traders remained skeptical, recalling past delays when the group feared an oversupply could drive prices down. This time, the move appears to have been influenced by external political pressure rather than increased market demand.
Political Factors at Play
According to Barclays analyst Amarpreet Singh, OPEC+’s decision was surprising and seemed to reflect political influence rather than a reaction to stronger-than-expected demand. The Trump administration, in particular, has been vocal about pushing for lower oil prices.
Former President Donald Trump campaigned on cutting energy prices, though experts widely dismissed his target of slashing them by half as unrealistic. In January, he reiterated his stance, stating that he would pressure Saudi Arabia and OPEC to reduce oil prices.
“You got to bring it down, which, frankly, I’m surprised they didn’t do before the election,” Trump said at the World Economic Forum earlier this year.
OPEC+ Retains Flexibility
Despite the commitment to increased output, OPEC+ has signaled that it may adjust its strategy based on market conditions. In a statement, the cartel emphasized that its flexibility would allow it to continue supporting oil market stability, leaving room to respond to unforeseen economic shifts.
As oil prices fluctuate, the coming months will test whether OPEC+ sticks to its production roadmap or revises its approach in response to changing demand and geopolitical pressures. In the meantime, energy markets will be watching closely to see whether the anticipated increase in supply translates into lower costs at the pump.