Oil prices drop as OPEC raises output

Oil prices continued to decline on Thursday, and the WTI price plummeted from $70.4 to $66.8 per barrel. If oil prices retreat, they may encounter support near $65.3 per barrel, while resistance may be found near $73.1 per barrel.

Oil prices dipped on Thursday after OPEC+ decided to raise its oil production. The organization decided to raise oil output by 411K barrels per day in May, putting pressure on oil prices.

US President Donald Trump has been using threats of imposing trade tariffs as a negotiation tool to further his agenda with other countries. Trump’s tariffs may spark global trade wars and are causing turmoil in markets. 

On Wednesday, Trump announced a 10% tariff on all imports into the US, as well as an additional 25% tariff on all imported automobiles and high reciprocal taxes against many countries. Oil prices plummeted after Trump’s tariff announcement. High taxes are likely to worsen the global economic outlook, raising oil demand concerns. 

Oil prices have been volatile due to geopolitical instability. Hostilities in the Gaza area have been resumed, breaking the ceasefire deal between Israel and Hamas. On the other hand, Russia and Ukraine agreed to stop attacking each other’s energy infrastructure for 30 days. The ceasefire deal includes attacks on oil ships in the Black Sea. In addition, the US has agreed to lift some of the sanctions against Russia, putting pressure on oil prices.

Oil prices are kept in check by high central banks’ interest rates. The US Federal Reserve kept interest rates unchanged at its policy meeting in March. FOMC policymakers voted unanimously to maintain the federal funds rate to a target range of 4.25% to 4.50%. Markets are pricing in two more rate cuts this year, with the first rate cut in June, while a third rate cut is also considered possible.

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Written by:
Myrsini Giannouli

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