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Phillips 66’s Los Angeles refinery is located in California.
Bing Guan | Reuters
Oil price outlook was hit by more bearish forecasts amid a comprehensive forecast by U.S. President Donald Trump and a shocking tariff announcement in the market. Businesses and investors are worried about trade wars and lowering global growth in the future.
Goldman Sachs on Thursday reduced its December 2025 global and U.S. benchmark forecasts for Brent and WTI by $5 to $66 and $66 and $62 a barrel, respectively, “because the two key downside risks we marked are already aware of, aware of, no tariff escalation and higher OPEC+ supply.”
The bank also cut forecasts for oil benchmarks in 2025 and 2026, adding: “We no longer forecast the price range, as price volatility may remain rising on higher recession risks.” Analysts at S&P Global Market Intelligence predict that global oil demand growth could be cut by 500,000 barrels per day in the worst case.
JPMorgan has raised its recession odds to the global economy to 60% this year, which is 40% previously forecast.
So when Opec produces about 40% of crude oil (combined with OPEC+), the market is stunned Almost triple the expected increase.
On Thursday, eight major OPEC+ producers agreed to increase crude oil production by 411,000 barrels, speeding up their scheduled hikes and reducing oil prices. The organization – Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman – is widely expected to implement less than 140,000 barrels per day next month.
The news lowered oil prices by 6%.
OPEC+ bullish and appease Trump
Several factors based on the decision of the oil production alliance. One of them is that the group is bullish on oil demand later this year, which puts it firmly in the minority because of the sour outlook for investors and fears that the global slowdown will worsen.
Eight OPEC+ members behind the production decision cited their “continuously healthy market foundation and positive market prospects” statement “This measure will provide opportunities for participating countries to accelerate their compensation,” said Thursday.
“The gradual increase may pause or reverse market conditions,” the statement added.
Another possible part of the group’s move is related to another T-word: the man in the White House, at the beginning of his first term and second term in office, he loudly asked the oil producer group to be rougher to help lower American prices.
“First of all, this part is about appeaseing Trump,” Saul Kavonic, head of energy research at MST Marque, told CNBC’s Dan Murphy on Friday.
“Trump will put pressure on OPEC to lower oil prices, thereby lowering global energy prices to offset the inflationary impact of its tariffs.”
OPEC officials denied that the move was taken to appease Trump.
Compliance and market share
Meanwhile, compliance as OPEC+ is a major issue – with the state’s crude oil that exceeds its quota, complicating the group’s efforts to control the supply allowed by the market – a move that could be a way to enforce, according to Helima Croft, head of global commodity strategy and MENA research at RBC Capital Markets.
“We believe that the OPEC leaders’ desire to send warning signals to Kazakhstan, Iraq and even Russia, even the cost of continuous production is the basis of the decision.”
Helima Croft
Lead Global Commodity Strategy and MENA Research at Royal Bank of Canada Capital Markets
“We believe that the desire of OPEC leaders is looking to send warning signals to Kazakhstan, Iraq and even Russia, even the cost of continuous production is the basis of the decision,” Croft wrote in a report released Thursday. She mentioned the oil price war in March 2020, when Saudi Arabia forced Russia to return to compliance after tank oil prices supplies and Moscow initially refused to curb production to help the alliance stabilize prices. Price war brings Brent crude oil prices to As low as $15 per barrel.
Cavennis said the growth in production was also “an example of OPEC increasing its market share,” adding that “it does ultimately come at the expense of the U.S. (shale) patches,” and that U.S. producers may not be too excited.
What will happen next?
Nader Itayim, editorial manager of Argus Media, said OPEC+’s confidence in the market’s turnover in the coming months as demand for oil will increase in summer and the tariff war will be resolved in the coming months.
“These countries are largely happy with the price of $70 a barrel, $75 a barrel,” Itayim said.
What happens next depends on the trajectory of tariffs and the potential trade war. Analysts say oil falling into the $60 range could force a moratorium or even force a reverse plan for OPEC+ production plans, although that is likely to be resisted by countries such as Iraq and Kazakhstan, which have long been eager to increase their revenues of oil production.
Itayim noted that whatever happened, the group remained flexible to adapt to its plans monthly.
“If things don’t go as they thought, then in fact, it’s a phone call.”
