Oil prices plunged on Friday to their lowest level in four years, reflecting the demand destruction implied in the ramping U.S. vs. world trade war, as well a pending production increase among Organization of Petroleum Exporting Countries.
As the impact of tariffs launched by the U.S. ricocheted around the global economy, global stock markets and commodities prices veered lower. West Texas Intermediate futures fell more than 8% in morning trade, to as low as $60.45 a barrel. It was the first time oil prices traded that low since April 2021.
Goldman Sachs sharply reduced its oil price forecast on Friday, cutting its outlook for the Brent crude global benchmark by 5.5%, and for WTI by more than 4%. Goldman now sees Brent averaging $69 a barrel for 2025. It puts the WTI average at $66. Meanwhile, JPMorgan increased its odds for a global recession to 60%, vs. a pre-"Liberation Day" estimate of 40%.
OPEC, Saudi Impact
OPEC+, the 12-country producing group plus Russia and several other nonmember countries, agreed on Thursday to increase production by 411,000 barrels per day beginning in May. Consensus views had expected an increase of around 135,000 bpd. Saudi Arabia, OPEC's largest oil producer, has widely been seen as championing the call for OPEC to boost output beyond expectations.
The short-term result will be low gasoline prices, providing a bright spot in a U.S. economy set for broad, tall and long-term prices increases linked to President Donald Trump's trade war.
Saudi was the first foreign country Trump called after taking his oath of office, and will also be the first foreign country Trump visits as president. The White House reportedly plans a visit sometime in May. Saudi Arabia has also played central roles in the Trump administration's attempts to end Russia's hostilities against Ukraine, and in the rapidly shifting sets of concerns in the Middle East, involving Iran, Syria and Israel disproportionate retaliation against Hamas in Gaza.
In October, the Wall Street Journal reported that the Saudi oil minister, Prince Abdulaziz bin Salman said that oil prices could drop as low as $50. The report said "so-called cheaters" within OPEC+ weren't adhering to production limits.
The Saudis and OPEC had generally targeted oil prices
A drop to $50 would allow Saudi to grab back large portions of market share, most presumably from the Russian and Indian markets that have been critical to Russia's economic survival under U.S. and EU sanctions. Those sanctions were imposed in response to Russia's attack on Ukraine, begun in February 2022.
Oil Price Dive Hammers Energy Stocks
In stock action, shares of Chevron dived more than 6%, not a large enough loss to crack Friday's five worst declines on the Dow Jones Industrial Average. Chevron reports it earned almost half its upstream revenue, and more than half its upstream profit, from international operations in 2024.
At the weak end of the S&P 500, APA, formerly Apache, plummeted 14%, putting shares down almost 28% for the week and at their lowest level since February 2021. APA produces nearly 40% of its oil in Egypt and the North Sea.
But not all the hard hit oil producers had strong overseas exposure.
Permian Basin heavyweight and Warren Buffett oil stock Occidental Petroleum traded down almost 8% on Friday. Its two-day loss left shares down more than 17% for the week.
Domestic exploration and production play Diamondback Energy skidded almost 12% Friday, putting its loss for the week near 21%.
The Energy Select Sector SPDR ETF (XLE) dropped almost 7% Friday and was down not quite 13% for the week. It tracks the S&P Energy Select Sector Index. It lists Exxon Mobil, Chevron, ConocoPhillips and The Williams Companies as its top holdings.
