Additionally, U.S. crude oil prices, represented by West Texas Intermediate (WTI), have dropped – down more than 20% on the year. Further reading With April bringing the biggest monthly drop since 2021, oil prices are still searching for strength in new month. In a surprise announcement, OPEC+ agreed to boost production. Now, the market is responding with wariness of future demand and general economic conditions.
The OPEC+ coalition—dominated by Saudi Arabia—has made its call. They will increase oil production an extra 411,000 barrels per day beginning in June. That’s almost three times the 140,000 barrels per day that Goldman Sachs analysts were projecting, to start. The announcement comes on the heels of a massive May production boom. By producing an additional 1.021 million barrels, that increase added 411,000 barrels per day to output.
Consequently, U.S. crude oil fell $2.49. This cut of 4.27% lowered the price to $55.80 a barrel immediately after the trading opened. Amid rising concerns about U.S. President Donald Trump’s tariffs. These concerns are driving speculation of a recession, which could result in an even greater economic slowdown and further oil demand stagnation in the months ahead.
Chevron and ExxonMobil both announced lackluster first quarter earnings last week, citing falling oil prices as the reason for their reduced profits. Both companies have been impacted by the current price environment. Consequently, their revenue is down significantly from this time last year.
Oilfield service companies like Baker Hughes and SLB are under the gun, too. They expect a drop off in capital spending on oil exploration and production due to lower oil prices. Those are in fact some of the biggest challenges that Lorenzo Simonelli, CEO of Baker Hughes, referred to in the company’s first-quarter earnings call on April 25.
“The prospects of an oversupplied oil market, rising tariffs, uncertainty in Mexico and activity weakness in Saudi Arabia are collectively constraining international upstream spending levels,” – Lorenzo Simonelli, Baker Hughes CEO
UBS has lowered its oil price forecast by $12 per barrel. This amendment reflects increasing alarm about the supply and demand balance within the precious metals market. OPEC+ is increasing its production, and economic clouds are still hanging. This combination will ensure persistently high pressure on oil prices for the long-term.