What’s Driving the Drop in Oil Stocks This Week?
In a surprise move, OPEC+ announced plans to increase oil production, triggering a shift in the energy market. On March 3rd, Brent crude prices plummeted 3% to $71.17 per barrel, dragging down oil stocks in its wake. ConocoPhillips (NYSE: COP) saw its shares fall 6.5%, Halliburton (NYSE: HAL) and EOG Resources (NYSE: EOG) saw their shares decline 5.2%, while SLB’s stock (NYSE: SLB) was down 4.4%. Led by Saudi Arabia and Russia, the cartel plans to boost output by 138,000 barrels per day starting in April, with further increases scheduled to reach an additional 2.2 million barrels per day by 2026. The production hike marks a strategic shift for OPEC+, which has been curtailing output by 5.85 million barrels per day since 2022 to stabilize the oil market.
Image by AdmiralFox from Pixabay
What To Expect Next?
While the current price drop was notable, it returned oil prices to December 2024 levels. The oil market has been impacted by President Trump’s renewed calls for OPEC+ to reduce prices. Earlier this year, oil prices soared to multi-month highs above $82 per barrel after the previous U.S. administration imposed new sanctions on Russia. However, prices have since dropped due to hopes of a peace deal between Russia and Ukraine, potentially boosting Russian oil exports. The Trump administration’s plan to eliminate Iran’s oil exports and the revocation of Chevron’s operating license in Venezuela have prevented the oil prices from falling further, underscoring the complex interplay between geopolitics and the global oil market.
Oil price forecasts face potential downward pressure from two key factors: an unexpectedly robust crude supply that includes rising output from the U.S. and other non-OPEC countries, such as Brazil, and a likely decline in oil demand. While a significant rebound in China’s oil demand is anticipated this year, the ongoing trade tensions and tariffs could slow global economic growth, thus reducing oil demand. The U.S. President’s new 25% tariffs on imports from Mexico and Canada took effect on Tuesday, March 4th, along with a doubling of duties on Chinese goods to 20%, launching new trade conflicts with the top three U.S. trading partners. Separately, see Inflation to Sink S&P 500, Brace For Impact? While tariffs pose a threat to economic and oil demand growth, they can also curb oil supply, particularly when targeted at major oil producers like Canada and Mexico. Notably, Canada’s oilfield drilling and services sector was already showing signs of slowing down ahead of the planned tariffs, highlighting the potential ripple effects of trade tensions on the energy market.
The International Energy Agency (IEA) has upwardly revised its 2025 oil demand growth projection to 1.1 million barrels per day (mb/d), exceeding the 870k b/d growth recorded last year. On the supply side, the global oil supply is expected to increase by 1.6 mb/d, reaching 104.5 mb/d by 2025, primarily driven by non-OPEC+ producers. Furthermore, non-OPEC+ oil supplies, led by the Americas, are projected to rise by 1.4 mb/d this year, outpacing anticipated demand growth.
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