Oil prices are falling for the second week in a row as global markets brace for another possible increase in oil production by OPEC+, the alliance of major oil exporting countries. On top of that, confusion and tension from a revived U.S. trade policy under Donald Trump have added more uncertainty, making traders nervous and weighing heavily on crude oil prices.
What’s Happening to Oil Prices?
As of Friday morning:
- Brent crude, which is the international price benchmark, has dropped by 31 cents to $63.84 per barrel.
- U.S. West Texas Intermediate (WTI) crude has also declined by 31 cents to $60.63 per barrel.
Both price indexes are down 1.5% this week. This continues a trend of weak oil prices seen in recent weeks, despite occasional rebounds in demand.
Why Are Prices Falling?
- OPEC+ Could Pump More Oil Soon
OPEC+, a group made up of the Organisation of Petroleum Exporting Countries and their allies (including Russia), is expected to announce another production hike during its upcoming meeting on Saturday. If that happens, more oil will flood the market at a time when global supply is already higher than demand. Robert Rennie, a top analyst at Westpac, says the group could raise production by even more than the 411,000 barrels per day seen in previous meetings. This move is likely aimed at protecting market share but may drive prices even lower in the short term. - Oil Surplus Growing Again
According to JPMorgan, the world currently has an oil surplus of about 2.2 million barrels per day. In simple terms, there’s too much oil available and not enough buyers. To fix this imbalance, prices may need to drop further to encourage demand or force some suppliers to cut back. - Trump Tariffs Stir Market Confusion
In a legal twist, a U.S. court has reinstated some of Donald Trump’s controversial tariffs. These trade duties, originally blocked by a lower court, were put back in place after an appeals court stepped in on Thursday. The back-and-forth legal battle has made markets jumpy. Oil traders fear that ongoing trade tensions especially between the U.S. and China could slow global economic growth, which would reduce oil consumption.
Trump Stance
- Since Trump announced a fresh round of tariffs on April 2, oil prices have plunged more than 10%. On top of this, Washington has now banned certain U.S. companies from exporting products like ethane and butane to China without a special licence. Some existing licences have also been revoked. These moves may disrupt global energy supply chains and further hurt demand from one of the world’s largest oil consumers China.
- Demand Is Rising, But Slowly
There was a slight improvement in oil demand last week, especially in the U.S., where travel picked up over the Memorial Day holiday. However, this boost wasn’t strong enough to lift prices significantly. JPMorgan analysts say that global oil demand is currently rising at about 400,000 barrels per day still well below the expected 650,000 barrels per day growth for this time of year. In other words, people are using more oil, but not as much as the market hoped.
What This Means Going Forward
Markets will be closely watching the outcome of Saturday’s OPEC+ meeting. If the group decides to increase oil output further without a matching increase in global demand, prices could fall even more.
At the same time, political uncertainty in the U.S. driven by Trump’s tariffs and ongoing legal battles is clouding predictions about the direction of oil prices.
JPMorgan expects prices to stay in the low $60s for now and possibly fall into the high $50s by the end of 2025 if the current trends continue.
Bottom Line
Oil prices are under pressure due to two main forces: expectations that OPEC+ will release more oil into an already oversupplied market, and the uncertainty caused by renewed U.S. tariffs. Although demand is recovering slowly, it’s not strong enough yet to balance the extra supply. The market remains fragile, and the next few weeks will be crucial.