OPEC+ starts to unwind production cuts amid market uncertainty

On April 1, 2025, the eight member countries of the OPEC+ oil cartel announced a plan to begin unwinding voluntary production cuts that have been in effect since November 2023. This agreement is set to increase production by 2.2 million barrels per day (bpd) gradually over an 18-month period, focusing on a monthly production increment of 137,000 bpd. The decision reflects OPEC+'s confidence in the 'healthy market fundamentals' despite the impending challenges due to external economic factors, specifically new U.S. tariffs announced by President Donald Trump that could negatively impact the global economy. As part of this unwinding, the UAE will raise its production target by 300,000 bpd after delay-related setbacks in previous years. Moreover, certain member countries, including Iraq and Kazakhstan, which have previously exceeded their production quotas, are expected to submit updated compensation schedules by March 17, 2025. This extended adjustment period signals an understanding within OPEC+ of the necessity for compliance to maintain unity and minimize disruptions in the oil market as they navigate through inherent market volatility. The reaction to the production increases coincided with significant fluctuations in crude oil prices following Trump's tariff announcements, showing immediate impacts on both U.S. domestic WTI prices and international Brent index prices, both declining by around 6%. This drop reflects the fear of increased oil supply on global markets, affected by international stock markets experiencing sell-offs in anticipation of the economic consequences as futures on U.S. markets dropped by roughly 3% ahead of market openings. In light of the current geopolitical situation, OPEC+'s approach emphasizes cautious adjustment while maintaining flexibility, explicitly stating that any production increases could be paused or reduced depending on market developments. Such a strategy underscores the precarious balance OPEC+ must achieve—supporting stable prices while responding to unpredictable demand forecasts set against the backdrop of evolving international trade dynamics fueled by political decisions like the newly imposed U.S. tariffs. Additionally, if the ongoing combination of production adjustments and market factors leads to sustained lower oil prices, it could jeopardize U.S. shale producers' ambitions, many of whom now face break-even costs that exceed $60 per barrel.