- OPEC+ announced a small production increase of only 138,000 bpd for April, citing a “healthier oil market outlook”.
- The move is more likely aimed at balancing geopolitical risks and appeasing President Trump amid his push for lower oil prices.
- OPEC+ members may be prioritizing market share over high prices.
OPEC+ cited a “healthier oil market outlook” when it announced this week that it would go ahead with the planned slight increase in production in April. The alliance is indeed the most bullish among forecasters and 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 unlikely the primary reason for the group’s decision to finally begin easing the 2.2 million 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 its bullish view to the market while seemingly appeasing, for now, U.S. President Donald Trump, who has repeatedly called on OPEC “to reduce the price of oil.” OPEC always publicly claims that it doesn’t mingle politics with market decisions. But in the current geopolitical situation, and an as unpredictable U.S. President as it gets, the
OPEC+ alliance may be looking to anticipate expected declines in oil supply from Venezuela and Iran, which are being hit with more and more sanctions by the Trump Administration.
The U.S. yanked Chevron’s license to operate in Venezuela on the same day that tariffs on Canadian and Mexican crude took effect. This could leave U.S. refiners that rely on heavy crude from the Americas with options to either accept the tariffs or look for alternatives.
The return of a token 138,000 bpd supply from OPEC+ next month will not make much difference on a fundamentals level, but it sends a message to the market that the group is watching geopolitical developments and is looking not to anger Trump.
Then there is the view from some analysts that after years of restricting production – but failing to boost prices to the high $80s or $90 per barrel needed to balance budgets – many OPEC+ members are itching to capitalize on increased sales volumes instead of higher oil prices. The alliance may have been fed up with losing market share at the expense of non-OPEC+ producers.But OPEC+ may have wanted to anticipate all this by announcing a very small increase that won’t make or break the market, but could potentially take the heat off the group. OPEC+’s thinking may have been that the market punishes the group with price declines every time it delays the output increase, “because it thinks fundamentals must be so bad,” Croft argues. The decision to go ahead with the production increase also plays in Russia’s favor, according to the strategist.“Russia would seem to be especially incentivized to appear supportive of an incremental increase, given the looming prospect of US sanctions relief,” Croft wrote in a note carried by Axios.
Of course, OPEC+ left the door open to any changes to its supply in any direction, saying in the press release that it remains “adaptable to evolving conditions,” and “Accordingly, this gradual increase may be paused or reversed subject to market conditions.”The path forward for OPEC+ is to continue monitoring market conditions and President Trump’s actions on sanctions and trade policies, avoiding any clash with the U.S. Administration. The trade wars with America’s biggest trade partners that began in earnest this week could dampen oil demand growth in both the U.S. and China. Moreover, there isn’t any precedence for the economic shock that the U.S.-Canada trade war could cause, Frances Donald and Cynthia Leach of RBC said on Tuesday. That’s the largest trade shock to the U.S. and Canada since the 1930s, and the U.S. is likely to struggle with the inflationary impact of broad-based tariffs, RBC reckons.
