Analysts from ING highlight concerns over global growth and oil demand due to the tariffs, raising questions about market stability as OPEC+ moves to increase supply amid a backdrop of tariff-related uncertainties.
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Crude oil futures, which declined by more than 6 per cent on Thursday, continued to trade lower on Friday morning. Also, the Organisation of Petroleum Exporting Countries and allies, known as OPEC+, decided to further increase production output in May. This decision comes at a time when tariffs imposed by the US on imports from other countries have significantly impacted market dynamics.
At 9.56 am on Friday, June, Brent oil futures were at $69.50, down by 0.91 per cent, and May crude oil futures on WTI (West Texas Intermediate) were at $66.29, down by 0.99 per cent. April crude oil futures were trading at ₹5,656 on Multi Commodity Exchange (MCX) during the initial hour of trading on Friday against the previous close of ₹5,735, down by 1.38 per cent, and May futures were trading at ₹5,638 against the previous close of ₹5,719, down by 1.42 per cent.
According to a statement by OPEC, the eight OPEC+ countries (Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, and Oman), which previously announced additional voluntary adjustments in April and November 2023, met virtually on April 3, to review global market conditions and outlook.
In view of the continuing healthy market fundamentals and the positive market outlook, and in accordance with the decision agreed upon on December 5 2024, subsequently reaffirmed on March 3 2025, to start a gradual and flexible return of the 2.2 million barrels per day voluntary adjustments starting from April 1 2025, the eight participating countries will implement a production adjustment of 411,000 barrels per day, equivalent to three monthly increments, in May 2025.
“This comprises the increment originally planned for May in addition to two monthly increments. The gradual increases may be paused or reversed subject to evolving market conditions. This flexibility will allow the group to continue to support oil market stability. The eight OPEC+ countries also noted that this measure will provide an opportunity for the participating countries to accelerate their compensation,” OPEC statement said.
In their Commodities Feed for Friday, Warren Patterson, Head of Commodities Strategy of ING Think, and Ewa Manthey, Commodities Strategist, said oil prices took a big hit on Thursday as a barrage of new tariffs raised concerns over global growth and the outlook for oil demand. ICE Brent settled more than 6.4 per cent lower on the day — the largest sell-off since August 2022.
It wasn’t just tariff concerns weighing on the market, but also OPEC+ announcing a surprise agreement to increase supply in May by more than expected. Under its original plan, OPEC+ was to increase supply by 135,000 barrels a day in May. The group will now increase supply by 411,000 barrels a day. OPEC+ cited healthy fundamentals and a ‘positive market outlook’ for the move. “However, we believe tariff uncertainty clouds the outlook for demand and prices,” they said.
Possibly, OPEC+ feels that the prospect of stricter sanctions against Venezuela and Iran allows it to increase supply, they said. Or maybe the US President Donald Trump has been successful in convincing the Saudis to increase supply. There have also been suggestions that the group seeks to punish producers that consistently produced above their targets. “Either way, this brings forward the expected surplus that we see in the oil market this year,” they said.
Trump’s move to impose tariffs on imports from various countries has already created a fear of global recession. Market players feel that Trump tariffs could impact the economies of several countries, which, in turn, may lead to a decline in demand for commodities such as crude oil. Market players also feel that Trump’s move to impose 54 per cent tariff on China could impact the global energy demand as China is one of the major consumers of crude oil in the global market.
April natural gas futures were trading at ₹349.20 on MCX during the initial hour of trading on Friday against the previous close of ₹353.80, down by 1.30 per cent.
On the National Commodities and Derivatives Exchange (NCDEX), April turmeric (farmer polished) contracts were trading at ₹15152 in the initial hour of trading on Friday against the previous close of ₹14,928, up by 1.50 per cent.
April jeera futures were trading at ₹22,900 on NCDEX in the initial hour of trading on Friday against the previous close of ₹23,120, down by 0.95 per cent.
Published on April 4, 2025
