Oil Prices Plummet as OPEC+ Agrees to Increase Output
Oil prices have fallen to a four-year low after the OPEC+ group of oil-producing nations announced plans to increase output. The decision has sent shockwaves through the market, with US benchmark crude oil falling to $57.35 per barrel, a decline of 94 cents.
According to a report by ABC News, the OPEC+ group, which includes eight oil-producing nations, will raise its output by 411,000 barrels per day as of June 1. The group cited strong fundamentals as the reason behind the decision, although analysts speculate that it may be an attempt to curry favor with US President Donald Trump before he visits the Middle East later this month.
The move is likely to have significant implications for the global economy, with many analysts predicting that it will lead to lower gas prices. As ABC News reports, "Washington wants cheap energy, and Gulf producers still lean on US security guarantees; the White House bears down, they listen." Stephen Innes of SPI Asset Management noted that "in that sense, the US president has become an unofficial swing vote inside OPEC+".
The impact of the decision is already being felt, with oil prices falling nearly 20% in the past three months as traders factor in the likely impact of Trump’s trade policies on the global economy. According to AAA, gasoline is selling for an average of about $3.17 per gallon, down from $3.66 per gallon a year ago.
The news has also had a significant impact on the stock market, with Berkshire Hathaway shares falling 3% after a surprise weekend announcement that CEO Warren Buffett would step down from the top spot by the end of the year. The Dow Jones Industrial Average and S&P 500 were both down in premarket trading, with the latter falling 0.9% and the former losing 0.7%.
As ABC News reports, "The US economy is already showing signs of strain from Trump’s tariff announcements, shrinking at a 0.3% annual pace during the first quarter of the year." The market is also awaiting the implementation of Trump’s 100% tariff on all movies coming into the US that are produced overseas, which was announced on social media over the weekend.
In Europe, markets were closed in Britain and much of Asia, although Germany’s DAX gained 0.7% while the CAC 40 in Paris slipped 0.6%. Australia’s S&P/ASX 200 lost 1% to 8,157.80, while Taiwan’s Taiex declined 1.2%. The US dollar fell to 143.83 Japanese yen from 144.71 yen, while the euro climbed to $1.1344 from 1.1306.
The S&P 500 is still down 3.3% so far this year and 7.4% below the record it reached in February. As the market continues to navigate the implications of OPEC+’s decision and Trump’s trade policies, investors will be keeping a close eye on developments in the coming days.
In related news, it has been reported that companies have been cutting and withdrawing financial forecasts due to the uncertainty over how much tariffs will cost them and how much they will squeeze consumers and sap spending.
Sources:
ABC News
