It all hinges on what policies are going to come out of the White House – whether we see more reversals on tariffs, for example, or new trade deals finalized. The latter would be very complex to achieve when you're talking about multiple deals at once. My guess is oil prices will drift a little lower.
Have OPEC+ output increases played a role in the oil price drop?
OPEC’s decisions have probably amplified some of the price movements, but they haven’t been the core driver. In its most recent Global Economic Outlook, the IMF attributed the primary declines to demand-side dynamics. The OPEC+ group of eight voluntary cutters meet on May 5th to decide on their policies for June, with a potential further acceleration in volumes already under consideration. But that move seems to be more about addressing non-compliance among certain producers rather than reacting to broader supply-demand dynamics. It’s also important to emphasize that the actual additional volumes entering the market are likely to fall short of the headline numbers. Many producers remain non-compliant with existing output targets. So even if cuts are technically eased, actual production may not rise significantly.
Should we expect better compliance in Q2?
Few expect countries like Kazakhstan to meaningfully improve compliance. Iraq, to its credit, has improved somewhat, but we’re entering the summer season when power demand spikes and Iraq will likely burn more crude in power plants to meet electricity needs. One underappreciated development is Saudi Arabia’s progress in reducing its own oil burn. Thanks to its liquid displacement program - adding renewables and more gas capacity -preliminary figures suggest a 200, 000 b/d year-on-year drop in oil burn during the first few months of 2025. If they sustain that trend, that could have more market impact than any short-term changes in OPEC+ policy on cuts.