Eight Members of OPEC Agree to Increase Production Causing Oil Prices to Drop

What Happened?

Eight members of OPEC on Thursday agreed to increase combined crude oil output by 411,000 barrels per day. That accelerated the pace of their scheduled hikes, causing oil prices to drop. 

The May production increase agreed to on Thursday is “equivalent to three monthly increments,” OPEC said in a statement, adding that “the gradual increases may be paused or reversed subject to evolving market conditions.”

The eight members of OPEC who agreed to the production increase are Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, and Oman. 

Why it Matters

The pledge to increase oil production comes on the heels of the sweeping tariffs imposed by the Trump Administration, which triggered promises of reciprocal tariffs from Europe and China. 

Taken together the rounds of tariffs and more than expected increase in the production of oil by OPEC members has created a volatile market.

Oil, which had already decreased 4% after U.S. President Donald Trump's announcement of tariffs on trading partners, extended declines after OPEC updated its plans in a statement. The Brent crude price dropped over 6% to below $70 a barrel.

The eight members of OPEC began on April 1^st to gradually cut 2.2 million barrels per day of production. This was separate from the production strategy of the broader 22-member OPEC alliance, which has already pledged to cut production by three and a half million barrels per day until the end of 2026. 

The same eight members of OPEC have agreed to meet on May 5^th to discuss planned production for June.

"This comprises the increment originally planned for May in addition to two monthly increments," OPEC said in a statement referring to the volume. "The gradual increases may be paused or reversed subject to evolving market conditions."

"OPEC focus is on compliance and this decision forces the laggards to step up compliance," said Amrita Sen, co-founder of Energy Aspects. According to Reuters, record output in Kazakhstan has angered several other members of the group, including top producer Saudi Arabia.

OPEC is urging Kazakhstan among other members, to make further cuts to compensate for excess production.

According to Market Watch, tighter U.S. sanctions on Iran and Russia, threats of sanctions on buyers of Venezuelan oil, and concerns over a possible tariff-related recession all provided support to oil. This set up the price to end March close to where it started. 

The decline in prices since April demonstrates the impact of the production increases and the volley of tariffs initiated by the Trump Administration.

How it Affects You

Global oil markets are still fragile.

While many leading oil producing countries, particularly in OPEC, need higher prices in order to meet domestic spending obligations.