In two days, the market's oil prices plummeted 13%, with all the market reports on oil prices being torn apart.

Trump administration tariffs policy and the unexpected production increase decision from OPEC+ have dealt a double blow to international oil prices, resulting in the most severe market crash since 2022. Brent crude oil plummeted by 13% in just two days, falling to less than $66 per barrel, exceeding market expectations. Wall Street institutions have rushed to rewrite their forecasts for 2025. Goldman Sachs, which was once bullish on crude oil, lowered its year-end Brent oil price forecast by $5 to $66 per barrel on Thursday. Enverus cut more than a third of its demand growth model, while UBS, which initially predicted global demand to increase by 1.1 million barrels per day, has now cut its expectations by nearly 50%. "When Trump imposed punitive tariffs on Canada nearly two months ago, we already revised our forecasts," said Al Salazar, director of oil and gas research at Enverus. "The timing of OPEC's production increase announcement feels like adding insult to injury." The double impact struck unexpectedly, causing a sharp decline in market expectations. The first blow came from the Trump administration's new tariff policy, which was perceived by the market as more severe than expected. This directly affected the prospects of major crude oil-importing economies and cast a shadow over global economic growth, sparking deep concerns about future energy demand. Shortly after, OPEC+ announced another blow to the market by expanding the planned production increase starting in May to three times the initial plan. This move significantly heightened concerns about oversupply in the market, becoming a key driver of oil price decline. The market was unprepared for this double impact, which is evident in trading data. According to ICE Futures Europe data, in the week leading up to the oil price plunge (ending on April 1st), hedge funds and other fund managers increased their net long positions in Brent crude to the highest level in eleven months, indicating that the market had underestimated policy risks. As oil prices plummeted, Wall Street quickly adjusted its expectations: Goldman Sachs lowered its year-end Brent crude price forecast by $5 to $66, Enverus cut more than a third of its demand growth model, and UBS slashed its initial forecast of 1.1 million barrels per day global demand growth by nearly half. Was it a "coincidence" or "premeditated"? In OPEC+'s decision to increase production unexpectedly, Saudi Arabia played a key role. According to reports, Saudi Arabia pushed to expand the planned production increase for May to three times the original scale, with an obvious intention to punish some OPEC+ member countries that had long failed to comply with output quotas, including Kazakhstan and Iraq. What is noteworthy is the timing of the announcement of this production increase, which came just hours after U.S. President Trump announced an escalation of tariffs, leading the market to interpret it as unlikely to be a coincidence. Citing an anonymous source, the media reported that officials from Washington and Riyadh had discussions in the days leading up to the announcement. OPEC+ representatives and oil traders widely speculated that Saudi Arabia deliberately chose this timing to maximize the bearish effect of the decision and put greater pressure on the market. However, for OPEC+ itself, this is a high-risk game, as many member countries highly depend on oil income to balance their budgets. The International Monetary Fund (IMF) estimates that Saudi Arabia and Iraq need oil prices to stay above $90 per barrel to achieve fiscal balance, while Kazakhstan's breakeven point is as high as $115 per barrel. In fact, the pressure on oil prices has already forced Saudi Arabia to cut some investment projects in its "Vision 2030" economic transformation plan. Sustained low oil prices will undoubtedly pose a serious challenge to the fiscal health of these countries. Chain reactions in the global energy landscape (1) The "winter" of U.S. shale oil: Rising costs and drilling pauses The oil price crash has brought new challenges to the Trump administration's strategy of promoting "energy dominance." The price of U.S. WTI crude oil futures closed near $61 per barrel on Friday. According to a recent survey by the Dallas Federal Reserve, this price is already below the profitability threshold of around $65 per barrel that many U.S. shale oil companies require to drill new wells in Texas and surrounding areas. Meanwhile, the trade war is pushing up production costs. Since the Trump administration imposed a 25% tariff on imported steel last month, pipeline costs needed for drilling have risen by about 30% compared to pre-tariff levels. The combination of low oil prices and high costs is threatening the motivation for U.S. drilling companies to increase production. Leo Mariani, an analyst at Roth Capital Partners, bluntly stated, "I don't think 'drill, baby, drill' has ever been a short-term reality for U.S. producers and is not even being considered now." The market's response has been direct. The S&P 500 energy index, which includes major oil and gas companies in the U.S., plummeted by 16% over the course of Thursday and Friday. Companies like APA Corp., Diamondback Energy Inc., and Baker Hughes Co. saw their stock prices drop by over 20%. However, the decline in oil prices may ultimately transmit to the consumer end, lowering domestic gasoline prices in the U.S., which may help to some extent in achieving Trump's goal of cutting energy costs. (2) Europe breathes a sigh of relief In contrast to the struggles of the U.S. shale oil industry, the European market has generally welcomed the drop in oil prices. The decline in oil and natural gas prices is expected to ease the high energy cost pressure in the region, with European natural gas prices falling to a six-month low, which is beneficial for replenishing natural gas stocks before the arrival of winter. Particularly for countries like Germany that need to fill gas storage facilities heavily in the summer, lower energy prices may bring some relief to their industrial sectors under pressure after the Russia-Ukraine conflict. In the Middle East, besides Saudi Arabia as the strategic leader, most other OPEC+ oil-producing countries will have to face the fiscal pressure brought by low oil prices. Market forces rethink pricing For investors, especially those in the U.S. shale oil sector, they are being forced to adapt to a possible prolonged period of low oil prices.normal state/normal conditionUBS analyst Josh Silverstein said: "You can almost feel that OPEC's move is an additional drive, forcing people to start seriously considering, 'Well, I really have to think about the possibility of oil prices falling below $60 now'."