U.S. crude oil prices fell out of bed Monday morning, dropping more than 4% shortly after the markets opened. The drop in price was $2.49, or 4.27%, and closed at $55.80 a barrel. This most recent dip continues a troubling trend. Oil prices have now fallen more than 25% this year, with April marking the biggest monthly decline since late 2021.
The Organization of the Petroleum Exporting Countries (OPEC+) members have played a huge part in this downtrend. They made the business decision to expand production, leading the market change. The OPEC coalition, led by Saudi Arabia, hashes out to bolster already-increased output by an additional 411,000 barrels per day starting in June. This decision almost triples Goldman Sachs’ first forecast from August of 140,000 bpd for that month. This decision comes on the heels of OPEC+’s surprise deal in May to increase production by 140,000 bpd.
Worries over the U.S. economy are further adding to the anxiety. Add in a potential recession fueled by U.S. President Donald Trump’s tariffs—and thus reduced demand for oil—and we have a perfect storm. Those economic concerns have pummeled the four largest oil companies. Recently, Chevron and Exxon released first quarter earnings, down significantly from 1Q ’24, largely due to decreased oil prices.
Oilfield service companies such as Baker Hughes and SLB (formerly Schlumberger Limited) already anticipate a drop in investment for exploration and production this year. It’s an exciting time, and these developments are pushing and pulling the change. Baker Hughes’ CEO Lorenzo Simonelli took note of this challenge when speaking on the company’s first-quarter earnings call on April 25.
“The prospects of an oversupplied oil market, rising tariffs, uncertainty in Mexico and activity weakness in Saudi Arabia are collectively constraining international upstream spending levels,” – Lorenzo Simonelli, Baker Hughes CEO
On the heels of increased supply and economic uncertainty, analysts at UBS have lowered their outlook. They’ve reduced their oil price forecast by $12 per barrel. The future of the oil market, as it stands, looks bleak. Meanwhile, the major oil companies and service firms are being forced to prepare for a more protracted period of a weaker price environment.
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