Oil prices plummet to lowest since 2021 after OPEC+ alliance announces production increase

Oil prices have plummeted to their lowest point since 2021, following an unexpected announcement from eight countries, including Saudi Arabia and Russia, that they will increase production.

This surprising decision by the OPEC+ alliance was made via a video conference on Thursday, less than a day after President Trump's Liberation Day tariff announcements escalated global trade war tensions, as reported by City AM.

Brent crude oil futures dropped by five per cent on Friday morning, mirroring the US West Texas Intermediate (WTI) benchmark's similar decline.

This widespread sell-off has led Goldman Sachs analysts to drastically lower their benchmark targets for Brent and WTI by over six per cent for 2026.

The OPEC+ alliance also includes oil producers Iraq, the UAE, Kuwait, Kazakhstan, Algeria, and Oman.

The group's announcement means oil production will triple the planned amount in May, as producers aim to reduce prices in response to excess production from members Iraq and Kazakhstan.

According to ING's head of commodities strategy Warren Patterson, the drop in crude oil prices following Trump's announcement may have presented OPEC+ with an opportunity.

"US President Trump is taking a more hawkish view towards Iran and Venezuela with stricter sanctions. OPEC+ might feel that this provides it with the opportunity to increase supply," he said.

"OPEC+ might see this as an opportunity to boost supply, especially after Trump announced secondary tariffs for buyers of Venezuelan oil and threatened similar measures for buyers of Iranian and, potentially, Russian oil."

"It is no secret that Trump wants lower oil prices and has pressured the Saudis to boost supply," he added.

Trump granted exemptions on import tariffs for oil, gas, and refined products, but economists are concerned about how his policies may impact global economic growth and inflation, potentially exerting a downward pressure on prices.

Patterson also revealed that markets were unexpectedly disturbed by these developments.

"This is strange given that, if anything, there is more uncertainty for the market, particularly when it comes to demand after the US tariff announcement.

"Current price levels mean it is unlikely that Trump is going to be successful in boosting domestic oil production. US oil producers are price sensitive," he noted further.

Mukesh Sahdev from Rystad Energy hinted at the possibility that oil prices might soon climb back up.

"With potential supply disruptions stemming from sanctions and tariffs – on both sellers and buyers – oil prices are unlikely to stay below $70 for long," he commented.