Oil Prices Drop As OPEC Plans To Pump More Oil Amid U.S. Tariff Wars and Ukraine Update

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Oil prices slumped to their lowest levels this year after OPEC+ announced its intention to increase production this April, its first planned hike since 2022. OPEC+ announced a planned 138,000 barrels per day (bpd) production increase starting in April—the first since 2022—as part of its phased approach to gradually unwind past supply cuts.

Why Did OPEC+ Decide to Raise Output?

Since 2022, OPEC+ has enforced significant production cuts, restricting supply to keep oil prices elevated. However, the decision to increase output now signals a shift in strategy. U.S. President Donald Trump has repeatedly called on Saudi Arabia and its allies to pump more oil, aiming to drive down crude prices. However, OPEC+ framed it as an independent market-driven adjustment. With U.S. West Texas Intermediate (WTI) crude trading near $67.50 per barrel and Brent at $70.70, OPEC+ has opted to test the waters by gradually unwinding its previous cuts.

According to insiders, this increase is part of a longer-term plan to phase out 2.2 million bpd in cuts by September 2026. However, OPEC+ also left room for adjustments, warning that the hike could be paused or reversed depending on market conditions.

The Impact of Tariffs on the Oil Market

Adding to the market’s instability, Trump confirmed that new tariffs on imports from Canada and Mexico took effect on Tuesday. These levies include a 10% duty on Canadian energy imports, raising concerns over how North American crude flows will be affected.

Meanwhile, China retaliated with its tariff increases from 10% to 15% on U.S. imports, which further strained global trade. The upcoming tariff war will likely weigh on economic activity, and further reduce the demand for oil and worsen the market’s bearish outlook.

Russia Sanctions and the Ukraine Factor

Another major wildcard in the oil market is Trump’s recent decision to pause all U.S. military aid to Ukraine. This move has fueled speculation that the White House may also ease sanctions on Russian oil exports. If restrictions on Russian crude are lifted, additional supply could flood the market, further driving down prices.

Reports indicate that the White House has instructed the State and Treasury departments to draft a list of Russian sanctions that could be rolled back as part of broader negotiations with Moscow. Analysts warn that such a move could lead to an oversupply of crude and worsen the downward pressure on oil prices.

How Low Can Oil Prices Go?

With OPEC+ increasing production, tariffs impacting demand, and Russian sanctions potentially easing, oil prices are facing a perfect storm. Goldman Sachs analysts have warned that the combination of higher-than-expected crude supply and softer U.S. economic activity poses significant downside risks to oil price forecasts.

Currently, the market is struggling to assess the full impact of these policy changes. The next few months are crucial in determining whether OPEC+ continues its production hikes or reverses course if prices fall too low. For now, traders and investors should brace for continued volatility in the energy sector.

Will OPEC’s production hike stabilize or crash oil prices further? Tell us what you think!

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