OPEC+ is set to increase oil production from April 1, reducing voluntary cuts by 2.2 million barrels per day. This move comes despite global supply concerns, sanctions, and economic uncertainties.
Oil Prices and Market Reactions
Oil prices saw mixed movements in March due to various global events. On March 29, West Texas Intermediate (WTI) crude for May settled at $69.36 per barrel, close to February’s $69.76. Brent crude closed at $73.63 per barrel, slightly above its February price.
Traders initially saw OPEC+’s decision as a negative sign, causing oil prices to drop. However, OPEC+ stated that production levels could still be adjusted based on market conditions.
Factors Affecting Oil Prices
Several factors have influenced oil prices recently:
- US Sanctions: Tougher sanctions on Iran and Russia have impacted supply chains.
- Venezuela Trade Policy: The US has threatened 25% tariffs on imports from countries buying Venezuelan oil.
- US Oil Reserves: The US plans to invest $20 billion in refilling its Strategic Petroleum Reserve, which could support oil prices.
Future Price Expectations
Despite OPEC+’s production increase, market analysts see various risks. Some experts predict higher oil prices in summer due to reduced Iranian and Venezuelan output and refinery maintenance ending. However, potential economic downturns caused by trade policies could lower demand.
OPEC+ also announced compensation cuts from countries that previously exceeded their production limits. These cuts total 4.2 million barrels per day, to be implemented gradually until June 2026. If fully followed, they could balance out the additional supply from April’s production increase.
However, compliance is uncertain. Countries like Kazakhstan and Iraq are expected to increase production, which could counteract planned reductions.
Brent Crude Forecast for 2025
BNP Paribas reduced its 2025 Brent crude price forecast by $2 to $73 per barrel. Capital Economics predicts Brent crude will end 2025 at $70 per barrel, assuming OPEC+ continues managing supply carefully.
OPEC+’s decision to increase production will have mixed effects. While supply increases may keep prices stable, geopolitical factors and trade policies could drive volatility in the market. Investors and consumers should keep an eye on global developments impacting oil prices in the coming months.
