OPEC+ announced a small production increase of only 138,000bpd for April, citing a “healthier oil market outlook”.
The move is more likely aimed at balancing geopoliticalrisks and appeasing President Trump amid his push for lower oil prices.
OPEC+ members may be prioritizing market share over highprices.
OPEC+ cited a “healthier oil market outlook” when itannounced this week that it would go ahead with the planned slight increase inproduction in April. The alliance is indeed the most bullish among forecastersand agencies, expecting global oil demand growth of 1.4 million barrels per day(bpd) for both 2025 and 2026. Yet, a “healthier” oil market outlook is unlikelythe primary reason for the group’s decision to finally begin easing the 2.2million bpd production cuts—easing that has already been delayed several times.With Monday’s decision to add about 138,000 bpd in April, OPEC+ projected itsbullish view to the market while seemingly appeasing, for now, U.S. PresidentDonald Trump, who has repeatedly called on OPEC “to reduce the price of oil.”OPEC always publicly claims that it doesn’t mingle politics with marketdecisions. But in the current geopolitical situation, and an as unpredictableU.S. President as it gets, the
OPEC+ ALLIANCE MAY BE LOOKING TO ANTICIPATE EXPECTEDDECLINES IN OIL SUPPLY FROM VENEZUELA AND IRAN, WHICH ARE BEING HIT WITH MOREAND MORE SANCTIONS BY THE TRUMP ADMINISTRATION.
The U.S. yanked Chevron’s license to operate in Venezuela onthe same day that tariffs on Canadian and Mexican crude took effect. This couldleave U.S. refiners that rely on heavy crude from the Americas with options toeither accept the tariffs or look for alternatives.
The return of a token 138,000 bpd supply from OPEC+ nextmonth will not make much difference on a fundamentals level, but it sends amessage to the market that the group is watching geopolitical developments andis looking not to anger Trump.
Then there is the view from some analysts that after yearsof restricting production – but failing to boost prices to the high $80s or $90per barrel needed to balance budgets – many OPEC+ members are itching tocapitalize on increased sales volumes instead of higher oil prices. Thealliance may have been fed up with losing market share at the expense ofnon-OPEC+ producers.But OPEC+ may have wanted to anticipate all this byannouncing a very small increase that won’t make or break the market, but couldpotentially take the heat off the group. OPEC+’s thinking may have been that the market punishes the group withprice declines every time it delays the output increase, “because it thinksfundamentals must be so bad,” Croft argues. The decision to go ahead with the production increase also plays inRussia’s favor, according to the strategist.“Russia would seem to be especiallyincentivized to appear supportive of an incremental increase, given the loomingprospect of US sanctions relief,” Croft wrote in a note carried by Axios.
Of course, OPEC+ left the door open to any changes to itssupply in any direction, saying in the press release that it remains “adaptableto evolving conditions,” and “Accordingly, this gradual increase may be pausedor reversed subject to market conditions.”The path forward for OPEC+ is tocontinue monitoring market conditions and President Trump’s actions onsanctions and trade policies, avoiding any clash with the U.S. Administration.The trade wars with America’s biggest trade partners that began in earnest thisweek could dampen oil demand growth in both the U.S. and China. Moreover, thereisn’t any precedence for the economic shock that the U.S.-Canada trade warcould cause, Frances Donald and Cynthia Leach of RBC said on Tuesday. That’sthe largest trade shock to the U.S. and Canada since the 1930s, and the U.S. islikely to struggle with the inflationary impact of broad-based tariffs, RBCreckons.
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