U.S. oil prices dip significantly following OPEC's commitment to raising production in April, raising questions about market impact and sustainability.
Oil Prices Plummet as OPEC Plus Prepares for Production Boost
Oil Prices Plummet as OPEC Plus Prepares for Production Boost
The decision to increase crude output signifies a shift in strategy amidst economic pressures.
March 3, 2025, 5:08 p.m. ET - Oil prices saw a significant decrease on Monday, hitting their lowest level this year. This drop comes after the OPEC Plus coalition, which includes the Saudi-led cartel and its allies, confirmed plans to gradually increase crude oil production starting in April.
The decision to boost output, particularly from major producers like Saudi Arabia and Russia, is a departure from previous supply constraints implemented to support higher prices. OPEC Plus members intend to enhance production by 2.2 million barrels per day, representing about 2 percent of global demand, spread out over several months.
While this could translate to lower energy costs for consumers, it may also impact the profit margins of oil-producing nations and companies. As a consequence, U.S. oil prices were recorded at $68.37 per barrel on Monday, a 2 percent decline. At this price level, new drilling in the U.S. remains economically viable, especially since many operations become unprofitable when crude prices drop below $60.
Since December, OPEC Plus has indicated that it plans to ramp up production, which has raised skepticism among oil traders due to previous delays on the cartel’s part, attributed to concerns regarding oversupply and price instability. Barclays analyst Amarpreet Singh highlighted that the move appears to be in response to political pressures, notably from the Trump administration, rather than a reaction to an unexpected surge in demand.
President Trump has previously emphasized his administration's goal of halving energy costs, a target many economists deem unrealistic. In January, he urged OPEC to lower oil prices, expressing surprise at their failure to respond pre-election. OPEC has indicated that output adjustments may depend on market conditions to maintain stability within the oil market.
Rebecca F. Elliott focuses on energy reporting and the industry's shift towards addressing climate change.
The decision to boost output, particularly from major producers like Saudi Arabia and Russia, is a departure from previous supply constraints implemented to support higher prices. OPEC Plus members intend to enhance production by 2.2 million barrels per day, representing about 2 percent of global demand, spread out over several months.
While this could translate to lower energy costs for consumers, it may also impact the profit margins of oil-producing nations and companies. As a consequence, U.S. oil prices were recorded at $68.37 per barrel on Monday, a 2 percent decline. At this price level, new drilling in the U.S. remains economically viable, especially since many operations become unprofitable when crude prices drop below $60.
Since December, OPEC Plus has indicated that it plans to ramp up production, which has raised skepticism among oil traders due to previous delays on the cartel’s part, attributed to concerns regarding oversupply and price instability. Barclays analyst Amarpreet Singh highlighted that the move appears to be in response to political pressures, notably from the Trump administration, rather than a reaction to an unexpected surge in demand.
President Trump has previously emphasized his administration's goal of halving energy costs, a target many economists deem unrealistic. In January, he urged OPEC to lower oil prices, expressing surprise at their failure to respond pre-election. OPEC has indicated that output adjustments may depend on market conditions to maintain stability within the oil market.
Rebecca F. Elliott focuses on energy reporting and the industry's shift towards addressing climate change.
