Oil prices fell sharply on Monday, reaching their lowest levels in 2025, following the unexpected decision by OPEC+ to restart some of its previously halted production. WTI crude fell 2% to settle at $68.37 per barrel, while Brent crude slipped 1.6% to $71.62 per barrel, marking their lowest levels since December.
The news sent shockwaves through energy stocks, with the sector experiencing widespread losses. The Energy Select Sector SPDR, which tracks the largest U.S. energy companies, sank 3.5% on Monday, making it the worst-performing sector of the day. Among the biggest losers on the S&P 500, APA Corporation APA plunged 8.7%, Diamondback Energy FANG slid 6.9% and ConocoPhillips COP declined 6.6%.
The Saudi-led cartel announced that eight members would gradually begin increasing output starting April 1, adding 138,000 barrels per day initially, with plans to scale up to 2 million barrels per day by 2026. The move caught markets off guard, as many had expected OPEC+ to delay any production increases due to forecasts of an oversupply later this year.
Market observers fear that increasing supply without a corresponding rise in demand could push oil prices lower, squeezing profit margins for oil producers. Historically, lower crude prices tend to weigh heavily on energy stocks, as they directly impact earnings, cash flows and capital investment plans. As it is, the decision to boost output comes amid concerns over slowing energy demand in the United States and China, as well as the potential economic impact of new U.S. tariffs on Canada, Mexico and China.
Several factors likely played into OPEC+'s decision to move forward with its production increases.
Economic and Political Pressures – Saudi Arabia, the de facto leader of OPEC, needs higher oil revenues to support government spending and large-scale economic projects. Additionally, the decision aligns with the ongoing efforts to strengthen ties with the United States, as President Trump has been pressuring OPEC to lower oil prices.
Market Share Concerns – OPEC+ may be looking to regain market share from U.S. shale producers. With American output rising and non-OPEC producers such as Brazil increasing exports, OPEC may feel the need to boost production to stay competitive.
Future Flexibility – OPEC+ emphasized that the production increase could be paused or reversed based on market conditions. This suggests that while the group is willing to bring more supply online, they remain cautious about oversaturating the market.
Despite OPEC’s decision, the global oil/energy market remains in a delicate balance.
While demand has been sluggish in early 2025, analysts expect a rebound in the second half of the year as economic activity picks up, particularly in Asia. Meanwhile, the increasing adoption of liquefied natural gas (“LNG”) as a fuel source, particularly in Europe and Asia, has led to a gradual shift in demand away from crude oil. Finally, American oil production remains robust, with output expected to remain near record highs. The Energy Information Administration (“EIA”) projects that the United States will maintain its position as the world’s largest crude producer, keeping global supplies elevated.
The sharp decline in oil prices raises concerns for energy stocks, particularly companies like APA, Diamondback Energy and ConocoPhillips. If crude prices fall below the key profitability thresholds, these companies may face lower revenues, reduced free cash flow, and potential cutbacks in drilling and production. Additionally, investor sentiment toward oil stocks tends to weaken when crude prices decline, leading to valuation compression across the sector.
However, despite these risks, APA, FANG, and COP remain fundamentally strong. All three companies carry a Zacks Rank #3 (Hold) and have well-diversified portfolios, efficient cost structures, and healthy balance sheets. Investors should avoid panic-selling and instead focus on the longer-term outlook for the energy sector.
You can see the complete list of today’s Zacks #1 Rank stocks here.
APA Corporation: Founded in 1954, Houston, TX-based APA Corporation is one of the world's leading independent energy companies engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids. APA’s Suriname portfolio in South America is particularly exciting, where it continues to achieve significant drilling success.
Diamondback Energy: Midland, TX-headquartered Diamondback Energy is an independent oil and gas exploration & production company, with its primary focus on the Permian Basin, where it has more than 885,000 net acres. Its activities are concentrated in the Wolfcamp, Spraberry and Bone Spring formations.
ConocoPhillips: Headquartered in Houston, TX, ConocoPhillips is primarily involved in the exploration and production of oil and natural gas. Considering proved reserves and production, the company is among the largest explorers and producers in the world.
Looking forward, crude prices could remain under pressure in the short term as markets digest OPEC’s move. However, if global demand picks up in the latter half of 2025 and geopolitical uncertainties persist, oil prices could find support. The possibility of OPEC adjusting its production strategy based on market conditions also adds an element of flexibility that could stabilize prices.
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