MW OPEC+ is boosting output in April. Here's what that could mean for oil prices.

By Myra P. Saefong

It's been a month since OPEC+ said it would go ahead and gradually unwind its voluntary production cuts starting on April 1, but threats to global supplies have helped prices recover their losses in March.

Tighter U.S. sanctions on Iran and Russia, threats of sanctions on buyers of Venezuelan oil and concerns over a possible tariff-related recession have all provided support to oil, setting up prices to end the month very close to where they started.

On Friday, West Texas Intermediate crude for May delivery (CL.1) (CLK25) settled at $69.36 a barrel on the New York Mercantile Exchange, just below the $69.76 front-month finish on Feb. 28. Global benchmark Brent for May delivery (BRN00) (BRNK25) ended at $73.63 on ICE Futures Europe, not far from the $73.18 close at the end of February.

OPEC+, which is comprised of the Organization of the Petroleum Exporting Countries and their allies, said on March 3 that it would go ahead with plans to boost production starting April 1 by gradually unwinding its voluntary production cuts of 2.2 million barrels per day.

"Many traders and analysts took that as bearish," said Anas Alhajji, an independent energy expert and managing partner at Energy Outlook Advisors. Just two days after the announcement, U.S. benchmark oil prices settled at their lowest since September.

OPEC+, however, said its decision would remain "adaptable to evolving conditions" and the gradual output increase could be "caused or reversed subject to market conditions."

The group managed volatility well in 2024, Alhajji told MarketWatch. President Donald Trump has been the "main source of volatility in 2025, making the job of OPEC+ more difficult."

The group "cannot manage the market if Trump's trade policies lead to a recession," he said.

And a lot has happened in the few weeks since OPEC+ confirmed they would start to lift production, with the U.S. reportedly indicating that it plans to refill its oil reserve to full capacity, shifting tariff-policy plans from the Trump administration and flare-ups in the Middle East.

Energy Secretary Chris Wright reportedly said during an interview on March 6 that the U.S. planned to seek up to $20 billion to fulfill Trump's goal of refilling the nation's Strategic Petroleum Reserve. That helped support oil prices as the move would reduce available global supplies.

Tighter U.S. sanctions on Iran and Russia also raised risks to oil inventories, while tariff-related recession fears lowered prospects for energy demand.

More recently, Trump on March 24 threatened "secondary tariffs" of 25% on all imports from any country that buys oil or natural gas from Venezuela.

Following the threat, "the upside risks to oil prices from his foreign policy are crystallising," said Kieran Tompkins, senior climate and commodities economics at Capital Economics, in recent note. However, "OPEC's spare capacity and apparent willingness to raise output blunt some of the risks from this potential disruption to the oil market."

Aldo Spanjer, head of energy strategy at BNP Paribas, believes near-term downside is limited in oil despite OPEC+ plans, given significant risks to some OPEC exports, particularly from Iran and Venezuela, prices at break-even levels for U.S. supply growth and demand from stock refills.

While BNP Paribas sees some strength in oil during the summer as lower production from Iran and Venezuela "compensates" for the OPEC output unwind and refinery maintenance is wound down, it remains bearish on oil due to "tariff-induced demand weakness that lengthens [supply] balances after the summer and into 2025," said Spanjer, in a recent note.

OPEC+ plans to gradually unwind output cuts totaling 2.2 million barrels per day from April through the end of September 2026.

"Compensation cuts" from OPEC+ members who have over-produced compared to their output target may "mitigate" that increase in production, if implemented, Spanjer said.

OPEC's plan shows total compensatory production cuts of 4.2 million barrels per day that will be gradually phased in from this March through June 2026. The data implies that full compliance with the compensation cuts could, in theory, more than offset the returning flows from the production cut unwind, said Spanjer.

But he said he's cautious when it comes to compliance with the compensatory cuts given Kazakhstan's ramp-up in production from the Tengiz field and Iraq's stated intension to resume flows from Kurdistan through the Ceyhan pipeline. OPEC+ may also decide to simply return more barrels if a higher-than-expected compliance occurred, he said.

BNP Paribas assumes that low compliance with the compensation reductions. It lowered its 2025 Brent price forecast by about $2 to an average of $73 a barrel.

Meanwhile, Tompkins from Capital Economics noted that "complexion" of upside risks to oil, which include Trump's renewed focus on Venezuela and Iran, would "look very different if OPEC+ weren't sitting on [roughly] 6 million bpd of spare capacity." And OPEC+ members are "seemingly looking for encouragement to raise output over the next 18 months and would probably be happy to oblige."

Given all of that, Tompkins said Capital Economics expects any near-term rise in oil prices from U.S. pressure on Venezuela and Iran to "dissipate," and is sticking with its forecast for Brent crude to end 2025 at $70 a barrel.

-Myra P. Saefong

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

March 30, 2025 19:01 ET (23:01 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.