Saudi Arabia's "patience" runs out, OPEC+ unexpectedly increases production and shocks the market, prompting Wall Street to lower oil price expectations.

OPEC+, a staunch defender of high oil prices, has unexpectedly decided to significantly increase production in May, leading to a sharp drop in oil prices and causing investors to face new market turmoil. According to a statement released by OPEC's website on April 3, the OPEC+ alliance has agreed to increase oil supply to the market by 411,000 barrels per day in May, three times the original plan. Representatives at the meeting revealed that this move aims to "punish" those violators by lowering oil prices. Saudi Energy Minister Prince Abdulaziz bin Salman's patience has run out. Saudi Arabia has been displeased with Kazakhstan and Iraq for long-term overproduction. According to representatives at the meeting, the prince stated that if these countries do not improve their performance, the unexpected production increase in May is just an "appetizer." This move signifies the increasing pressure OPEC+ is facing in balancing the global oil market, and to make matters worse, the trade tariffs announced by Trump have already impacted the oil market. Brent crude futures once fell by 7.3%, marking the largest drop in two years. As of press time, Brent oil fell to $69 per barrel. Goldman Sachs has lowered its oil price forecast after the sharp drop in oil prices, reducing its December Brent crude oil price forecast by $5 to $66 per barrel. Analysts, including Daan Struyven, stated in a report that oil price fluctuations "may also continue to rise due to increased risks of an economic recession." Citigroup and JPMorgan predict that oil prices will eventually fall to around $60 per barrel. Under geopolitical pressure, Saudi Arabia's "patience" has run out The timing of OPEC's announcement does not seem coincidental, and the market widely speculates that Riyadh's intention is to amplify its impact on oil prices. Helima Croft, head of commodity strategy at RBC Capital, stated that this move aims to send a warning to Kazakhstan, Iraq, and even Russia, reminding them of the consequences of continued overproduction. Kazakhstan has angered Saudi Arabia by significantly increasing production at its giant Tengiz oil field. Despite Kazakhstan's promise to better comply with OPEC+'s production limits, its production in February still exceeded the target by 300,000 barrels per day. Iraq is another country that often violates regulations, and although its production has been closer to quotas in recent months, it has not fulfilled its promise to offset past overproduction. Although representatives at the meeting were surprised by the outcome, they support taking measures to end violations and support the proposal of a significant increase in production in May by Saudi Arabia and Russia. President of Rapidan Energy Advisors LLC, Bob McNally, believes that this move aims to encourage Kazakhstan and Iraq to improve their compliance in a balanced way. In addition, some analysts speculate that Saudi Arabia and Russia may hope to show goodwill to the U.S. president, who has urged OPEC to lower oil prices. The increase in OPEC+ production also helps Trump fulfill his promise to cut off Iranian oil exports. Wall Street downgrades oil price expectations one after another Key oil indicators are indicating that supply is becoming more abundant. By the close of trading on Thursday, the spread of global benchmark Brent crude oil futures had generally narrowed, with futures contracts showing significant declines. For example, the spread between near-month and fourth-month contracts, with the spot premium (the price of near-month oil delivery higher than that of far-month delivery) closing at $1.84 per barrel, compared to $2.16 per barrel the previous day. The six-month spread's spot premium was $2.80 per barrel on Thursday, down from $3.53 per barrel on Wednesday. The trend is also the same for forward contracts, with one-year spreads and the December-to-December spread (both important indicators of long-term supply-demand balance) showing declines. With additional oil from OPEC+ entering the market, oil prices may face greater downward pressure. Goldman Sachs has lowered its oil price forecast after the sharp drop in oil prices, reducing its December Brent crude oil price forecast by $5 per barrel to $66 per barrel. Goldman stated in its report: "Given rising risks of an economic recession and the potential for OPEC+ to further increase supplies, our revised oil price forecast still has downside risks, especially for 2026." Citigroup and JPMorgan predict that the price of crude oil will eventually fall to around $60 per barrel. Norbert Ruecker, head of economics at Julius Baer & Co. Ltd., stated that in a year where oil demand is nearly stagnant, the prospects of oversupply are becoming more severe. This article is translated from "Wall Street News", by Zhang Yaqi, GMTEight Editor: Xu Wenqiang.