Moneycontrol Pro Panorama | Oil spill

The oil market has recently experienced a wave of negative news impacting its prices.

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The oil market has experienced a significant price decline due to a double whammy of factors. The price of WTI crude oil fell by more than 7 percent after President Donald Trump's announcement of reciprocal tariffs coinciding with OPEC+'s unexpected decision to increase production.

Meanwhile, Brent crude was trading at $68.72, down nearly 20 percent from its peak of over $82 per barrel in 2025. WTI crude also saw a similar decline, trading at $65.52.

The oil market has recently experienced a wave of negative news impacting its prices, primarily driven by geopolitical developments from the United States.

Trump has announced a series of measures targeting OPEC+ members, including Russia, Iran, and Venezuela. He began by imposing a 25 percent tariff on countries importing oil from Venezuela. Following this, he threatened to impose tariffs ranging from 25-50 percent on buyers of Russian oil. Trump, who frequently criticises Iran, also warned of potential military action and the introduction of secondary tariffs on Iran’s major buyers, specifically China and India.

Trump has targeted both the main suppliers and buyers in the oil market, causing oil prices to drop closer to their levels in November 2021. Following Trump's announcement, the market anticipates a reduction in supply from Venezuela and Iran, both of which have been increasing production over the past few years. Iran's oil output has been on the rise since 2022 while Venezuela reached its peak production in the first two months of 2025. However, sanctions led to a significant decrease of 11.5 percent in March.

To compensate the loss in production, the eight OPEC+ nations announced they will raise output by 411,000 barrels per day (bpd) in May—significantly exceeding the anticipated monthly increase. Ironically, while the world is bracing for a slowdown due to tariffs, OPEC+ has presented a confident front, stating that the increase is a response to robust market fundamentals.

The International Monetary Fund (IMF) and oil sector analysts support the slowdown perspective. The IMF issued a statement affirming it, and nearly all analysts agree on tariffs' negative impact.

Lower oil prices are beginning to significantly impact oil producers. Saudi Arabia needs to increase production to address its budget deficit. The country has been investing heavily in its ambitious Vision 2030 plan to build futuristic cities and resorts. Reports indicate that Saudi Arabia requires oil prices to remain above $90 per barrel to balance its budget. With Aramco cutting its dividend by 30 percent, the kingdom urgently needs more oil to generate revenue.

Oil companies on both sides of the Atlantic are investing to boost production. Major European companies, such as BP and Shell, have shifted their focus back to hydrocarbons after investing billions in alternative energy. They have now decided to concentrate on their core competencies in the oil sector.

BP announced plans to increase its oil and gas production spending by 25 percent annually while significantly reducing investments in transition-related initiatives by 70 percent.

Shell has recently revised its immediate strategy, decreasing its spending target on alternative fuels for the next three years and prioritising natural gas instead. The company aims at a 4-5 percent increase in annual LNG (liquefied natural gas) sales leading up to 2030.

US oil majors like Exxon and Chevron continue to boost their revenues by focusing on their core business in oil and gas. Exxon plans to increase its oil and gas production by 18 percent over the next five years, and Chevron has announced the acquisition of Hess Corp, which possesses a valuable asset in Guyana.

As tariffs are expected to continue affecting demand, pressure on the supply side will likely keep oil prices stable for the foreseeable future. 

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Shishir Asthana Moneycontrol Pro