OPEC+ Set to Boost Oil Output: What This Means for Prices

As April approaches, all eyes are on the Organization of the Petroleum Exporting Countries and their allies, collectively known as OPEC+. The consortium announced its decision to gradually unwind its voluntary production cuts starting on April 1, paving the way for a significant increase in oil supply. This decision comes in the wake of various geopolitical and economic pressures on global oil supplies. With rising concerns surrounding sanctions and international trade policies, oil prices show a notable resilience as they continue to tread close to their previous highs.

Market Reactions Leading Up to OPEC+’s Announcement

In March, the oil market experienced a rollercoaster ride. OPEC+ reported plans to boost production by unwinding cuts totaling 2.2 million barrels per day (bpd). Many analysts interpreted this move as a potential bearish signal for prices. On March 3, shortly after the announcement, U.S. benchmark oil prices plunged to their lowest levels since September. However, threats against oil supplies, including tighter U.S. sanctions on Iran and Russia, as well as potential tariffs on Venezuelan oil buyers, have helped support prices, keeping them near their starting levels for March.

On March 31, West Texas Intermediate (WTI) crude settled at $69.36 per barrel, slightly below its February 28 close. Meanwhile, Brent crude finished the month at $73.63 per barrel, remaining close to February’s closing price.

The Uncertain Landscape of Oil Supply and Demand

While OPEC+ has monitored market conditions carefully, experts suggest the situation remains highly fluid. Anas Alhajji, an independent energy expert, highlights that the volatility in 2025 predominantly stems from President Donald Trump’s policies, complicating OPEC+’s ability to stabilize the market. Should U.S. trade policies lead to a recession, OPEC+ could find itself in a tough position managing its output levels and market repercussions.

The U.S.’s recent plans to replenish its Strategic Petroleum Reserve (SPR) with up to $20 billion, reported by Energy Secretary Chris Wright, reflects efforts to reduce global oil supplies, indirectly driving up prices. Coupled with increasing sanctions, this transition raises more risks regarding oil inventories as well as demand from refilling stockpiles.

Risks and Future Outlook

In the weeks leading up to the expected output increase, Trump threatened secondary tariffs of 25% on any country purchasing oil or natural gas from Venezuela, creating even more uncertainty in the market. Capital Economics’ Kieran Tompkins noted that these foreign policy decisions intensify upside risks for oil prices. However, OPEC+’s extensive spare capacity may blunt some of these risks.

Experts from BNP Paribas have expressed a guarded perspective on oil prices, suggesting that immediate downside risks are limited due to OPEC’s additional cuts. They predict that overall market dynamics, including weakened demand due to tariffs, will likely lengthen supply balances into 2025. They expect that any loss of production from Iran and Venezuela may, in the short term, counterbalance OPEC’s output increases. Still, BNP Paribas revised its 2025 Brent price forecast down to an average of $73 per barrel.

OPEC+ Output Plans

OPEC+ intends to unwind production cuts through September 2026, looking to gradually increase output in line with evolving market conditions. However, compensation cuts for members who over-produced could mitigate the extent of this increase. As production ramps up, particular attention will be paid to compliance levels from countries like Kazakhstan and Iraq, both of which have indicated intentions to boost their output.

Ultimately, while OPEC+ currently holds a significant capacity cushion—estimated at around 6 million bpd—the market’s future will greatly depend on compliance with production quotas and external geopolitical pressures. Capital Economics believes any near-term price increases resulting from U.S. actions may dissipate quickly, expecting Brent crude to average $70 per barrel by the end of 2025.

Conclusion

As we head into April, the oil market’s landscape remains precarious. OPEC+’s plans to increase output might help fulfill some of the anticipated demand in the summer months, but external factors—including geopolitical tensions and U.S. trade policies—will ultimately determine future pricing dynamics. Investors and stakeholders should keep a vigilant watch on both OPEC+ actions and the global political climate to navigate the complexities of the oil market in the coming months.