Crude oil prices took a hit on Monday after OPEC+ announced plans to raise production for the first time in over two years. The decision, which will add about 138,000 barrels per day starting in April, has shaken the markets, with oil prices dropping in response.
At the time of writing, West Texas Intermediate (WTI) crude traded at $67.90 per barrel, down 0.69%, while Brent crude stood at $70.99 per barrel, losing 0.88%. Murban crude also fell to $71.32 per barrel, dropping 0.86%. Natural gas prices also saw a slight decline, down 0.41% to $4.105 per MMBtu.
Why Are Oil Prices Falling?
The drop in oil prices comes after OPEC+ a coalition of oil-producing countries led by Saudi Arabia and Russia decided to gradually ease its supply cuts. Since 2022, the group had been holding back 2.2 million barrels per day (bpd) to keep prices stable. However, with global demand shifting and pressure from major economies like the United States, OPEC+ has decided to start increasing production from April 2025.
The move is being seen as a test run rather than a full return to normal production levels. OPEC+ insiders have said they will pause or reverse the decision if needed, depending on how the market reacts.
Geopolitics and Oil Prices
The decision to increase output is also influenced by political and economic pressures. U.S. President Donald Trump has been pushing for lower oil prices, urging Saudi Arabia and its allies to pump more crude. Meanwhile, global uncertainty remains high, with ongoing sanctions on Russia, Iran, and Venezuela creating volatility in supply chains.
Additionally, talks about a potential peace deal between Russia and Ukraine have added to the uncertainty. If such a deal goes through, it could lead to more Russian oil entering the market, further impacting prices.
OPEC+ Divided Over Production Hike
While OPEC+ has agreed to increase production, not all member countries are on the same page. Saudi Arabia, known for its cautious approach to oil market stability, was reportedly reluctant to open the floodgates too quickly. On the other hand, the United Arab Emirates (UAE) has been eager to raise production and has even considered leaving OPEC+ in the past.
With Chinese demand fluctuating, the current move by OPEC+ appears to be an experiment rather than a permanent shift.
What Happens Next?
For now, oil traders and analysts are watching to see how the market reacts to this new production strategy. If oil prices continue to fall sharply, OPEC+ may decide to slow down or reverse the increase. However, if demand picks up especially from countries like China and India, prices could stabilise or even rise.
One thing is clear: the global oil market remains highly unpredictable, and the coming months will determine whether OPEC+ sticks to its plan or makes another U-turn.
