Surprise OPEC+ Hike Adds To Trump Tariffs To Send Oil Plunging Around 7%

Oil tumbled the most since 2023 after suffering a twin hit from President Donald Trump's tariffs and an OPEC+ decision to increase output faster than previously announced.

West Texas Intermediate futures plunged as much as 7.4% to trade below $67 a barrel, while global benchmark Brent plummeted as much as 6.9% to slip below $70.

Trump's deluge of tariffs is creating fresh doubts about the outlook for the global economy, with levies against major crude importers such as China and India coming in more aggressive than feared. Although the administration steered away from actions that would directly affect oil markets — such as refraining from measures that would curb flows from Canada and Mexico — concerns that the trade war will sap global energy demand hammered prices.  

Hours later, the Organization of the Petroleum Exporting Countries and its allies unexpectedly said they would add more than 400,000 barrels of daily output back to the market next month. That was three times the amount the group had previously planned to revive, signaling a significant policy shift after years of supply constraints that had supported crude prices. 

The two moves sent shockwaves across oil markets, though potentially offer a win for Trump, who has repeatedly bemoaned high crude prices. While falling oil prices could ease inflationary pressures for central banks, they also underscore a wider concern about the outlook for growth that's led firms across the industry to slash their forecasts in recent weeks. 

“First recession and demand fears driven by Trump's tariff bazooka, and now the prospect for rising supply from OPEC,” said Ole Hansen, head of commodities strategy at Saxo Bank A/S. “Traders will once again turn their attention to the risk of an oversupplied market.”

OPEC Shift

The bumper output boost is a big change for OPEC+, which had previously emphasized that it could pause or reverse its planned supply hikes if needed. The group's communications have made little reference to the idea of accelerating production increases. 

The policy shift follows a long period of tension within the group over certain members that have consistently flouted production limits. Kazakhstan has been a particular source of friction after it significantly exceeded its output ceiling during the startup of the expansion of its giant Tengiz oil field. 

Thursday's decision is intended to put price pressure on quota cheats, while also providing them with the opportunity to make larger compensation cuts to atone for past overproduction, delegates said, asking not to be identified as the talks were private.

As well as internal issues, OPEC+ has also faced external pressure from Trump to cut the price of crude.

“If OPEC+ wanted to keep the oil price at bay, their timing could not have been better now that President Trump has initiated reciprocal tariff measures with the rest of the world,” said Harry Tchilinguirian, group head of research at Onyx Capital Group. 

Lost Barrel

The extra supply from OPEC+ could tie into another policy priority for Trump — tighter sanctions on Iran and Venezuela. 

The US president has pledged a maximum-pressure campaign to limit oil exports from both countries. He also threatened “secondary tariffs” on Russian shipments earlier this week. Higher supplies from other OPEC+ members could give him more leeway to restrict flows elsewhere.

“We think this is to replace barrels lost from tighter US sanctions on Iran, and, possibly, also lower expectations than just recently of a Ukraine ceasefire and related western sanctions relief,” Henning Gloystein, head of energy and climate at consultants Eurasia Group, said of the OPEC+ hike. 

Thursday's huge price swings, the biggest in more than two years, are also a reminder of the type of volatility that has kept some traders on the sidelines in recent months. Some of the world's biggest commodity trading houses last month said that while the market's outlook was weaker, both Trump and OPEC+ were adding to the uncertainty.

The eight OPEC+ countries participating in the group's so-called voluntary cuts said they will hold monthly meetings to review market conditions, according to the group's statement. Talks on May 5 will decide on June production levels.