The oil market is currently experiencing one of its most volatile periods in recent years. Currently, the price of U.S. WTI crude oil declined by 4.27%, reaching $55.80 per barrel, while Brent crude fell by 3.9% to $58.90.* This represents the steepest monthly drop since 2021, with oil prices now down more than 20% year-to-date. Such developments have sparked renewed concern across the global energy sector and created headwinds for investment portfolios tied to commodity producers.
OPEC+ output surprise sparks fear of oversupply
One of the primary drivers behind this decline is the unexpected decision by OPEC+ to ramp up production. The alliance, led by Saudi Arabia, announced an increase of 411,000 barrels per day for June, mirroring the same volume added in May. This means a total boost of 822,000 barrels per day over two months, surpassing Goldman Sachs’ forecast of just 140,000 barrels for June. The result is a growing concern that the market may soon face a supply glut, further exacerbating the downward pressure on prices in an environment already grappling with weakened global demand.
Trump’s tariffs and the recession shadow
Another destabilizing factor has emerged in the form of new U.S. trade tariffs imposed by President Donald Trump. These measures are adding to fears of a global economic slowdown, especially as trade flows become more restricted. The oil sector is particularly sensitive to shifts in global growth expectations, and signs of contraction are already visible. Companies such as Baker Hughes and SLB have revised their outlooks downward, citing weakening investment activity, particularly in Mexico and Saudi Arabia, two key oil markets.
Oil majors see profitability eroding
The recent decline in oil prices has started to take a toll on the industry’s biggest players. Chevron and ExxonMobil both reported year-over-year drops in net profit for the first quarter of 2025, primarily due to lower realized oil prices and rising maintenance costs tied to production. This signals that even the most capitalized and diversified oil firms are not immune to the consequences of a deteriorating price environment.
Analyst forecasts
According to analysts at Goldman Sachs, the average price of WTI crude for 2025 is projected to be around $59 per barrel, with Brent expected to average $63 per barrel. However, these forecasts come with considerable uncertainty and are heavily dependent on geopolitical developments, global economic performance, and the future actions of OPEC+. Any one of these variables could easily tilt the balance in either direction.[1]
Risk meets opportunity
The oil market in 2025 is being shaped by a complex interplay of economic, political, and industry-specific factors. While the short-term outlook remains bearish, especially with production increasing and demand faltering, long-term investors may find opportunity in the current weakness. For patient investors, timely exposure to the sector could yield significant upside, particularly if global demand stabilizes and OPEC+ signals restraint. In the meantime, close attention should be paid to OPEC+ announcements, global GDP indicators, and corporate capital expenditure trends as key signals for any potential turnaround.
* Past performance is no guarantee of future results.
[1] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or based on the current economic environment which is subject to change. Such statements are not guaranteeing of future performance. They involve risks and other uncertainties which are difficult to predict. Results could differ materially from those expressed or implied in any forward-looking statements.
