Oil prices plunged by about 6 per cent on Thursday, their biggest decline since 2022, after the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) agreed to a surprise output increase the day after the US President, Mr Donald Trump, announced sweeping new import tariffs.
Brent futures went down by $4.81 or 6.42 per cent to $70.14 per barrel and the US West Texas Intermediate (WTI) futures crumbled by $4.76 or 6.64 per cent to $66.95 a barrel.
Eight key producers in the OPEC+ alliance – Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, and Oman – met virtually to review global market conditions and decided to raise collective output by 411,000 barrels per day, starting in May.
The group was widely expected to implement an increase of just under 140,000 barrels per day next month.
The May hike agreed on Thursday is “equivalent to three monthly increments,” OPEC said in a statement, adding that “the gradual increases may be paused or reversed subject to evolving market conditions.”
This is up from the 135,000 barrels per day initially planned.
Oil prices were already down as investors worried that President Trump’s tariffs would escalate a global trade war, curtail economic growth, and limit fuel demand.
The American President on Wednesday unveiled a 10 per cent minimum tariff on most goods imported to the US, the world’s biggest oil consumer. It also added much higher duties on products from dozens of countries, calling them reciprocal tariffs
The White House said imports of oil, gas and refined products were exempted from the new tariffs.
However, this doesn’t mean it won’t impact prices since tariffs are digested by domestic consumers and businesses and will lead to increase in cost, which impedes the rise in economic wealth.
Analysts expect more price volatility in the near term, given the tariffs may change as countries try to negotiate lower rates or impose retaliatory levies.
On its part, analysts at UBS cut their oil forecasts for Brent by $3 per barrel over 2025-2026 to $72 per barrel.
Also on the supply angle, US Energy Information Administration (EIA) data on Wednesday showed US crude inventories rose by a surprisingly large 6.2 million barrels last week.