The News
Oil prices slipped to their lowest level in almost four years Friday, amid fears of an escalating trade war and a decision by OPEC+ to increase its output.
The coalition of oil producing countries announced Thursday it would permit its members to triple their output. While some OPEC+ delegates said this was an effort to punish members who were overproducing, analysts suspect it is also an effort to appease US President Donald Trump, who has demanded the group pump more crude to reduce US prices.
And while oil and gas imports to the US were exempted from Trump’s tariff blitz Wednesday, an analyst said that retaliation from nations around the world would “hurt economic growth and demand for key commodities such as crude oil and refined products.”
SIGNALS
Depressed prices could persist for some time
Despite oil and gas imports spared from Trump’s reciprocal tariffs, “a global trade war will hurt global oil demand,” a Gulf economics analyst told Semafor. Goldman Sachs slashed its oil price forecast for 2025, citing downside risks of tariff escalation and higher OPEC+ output, while S&P Global Market Intelligence predicted that in a worse case scenario, global demand growth could fall by 500,000 barrels per day. Still, OPEC+ tripling output suggests it is bullish on oil demand in the medium- to longer term — putting the cartel firmly in the minority, CNBC noted.
Low oil prices could hurt Russia’s war machine
While Russians celebrated being spared from Trump’s tariffs, the country’s economists warned that falling oil prices could severely impact Russia: Trump’s duties “can cause even more serious problems for us than sanctions directly aimed at [us],” a columnist argued in the pro-Kremlin Moskovsky Komsomolets. Some analysts believe that if oil prices remain low, the Kremlin will have little choice but to start cutting spending, The Moscow Times reported. “Russia’s economic fortunes are tied to the oil price,” one Russia expert argued, meaning that Trump’s tariffs “can easily push Russia’s economy into recession.” Earlier this year, Trump called on OPEC+ to “bring down the oil price” in order to hurt Russia’s finances and possibly end its war with Ukraine.
Trump’s call to ‘Drill, baby, drill’ comes under threat
If low oil prices persist, it could complicate Trump’s “drill, baby, drill” agenda. US producers have pushed back against the idea that their output will dramatically increase, and some experts are predicting that growth in US production will slow down. One oil executive said Trump’s goal to push oil prices down had already caused firms to reduce capital expenditures. One exception is ExxonMobil, which plans to drastically build out its production in the US and Guyana.“We believe our operating costs are the lowest in the industry,” Bart Cahir, the company’s senior vice president for Upstream Unconventional told Semafor, stressing that the company is “committed to growing.”