Oil, Trade Wars, and the Accelerating March Toward Global Conflict
OPEC’s Surprise Oil Strategy and Recent Price Swings
Over the past week, global oil markets have been roiled by a surprise production move from OPEC+.
Eight key OPEC+ producers agreed to boost output by 411,000 barrels per day in May – nearly triple the expected increase. This policy U-turn was driven in part by Saudi Arabia's anger at member countries that had been overproducing beyond their quotas.
Riyadh "fired a bombshell" by pushing the group to open the taps and punish cheaters like Kazakhstan and Iraq, which had posted record-high output and lagged in compliance.
The decision marked a dramatic departure from OPEC's usual tactics of tightening supply, and oil prices reacted swiftly – plunging over 6% to below $70 for Brent crude as the news hit, eventually falling 8% to under $65 per barrel by week's end.
This drop brought prices to their lowest level since 2021.
Current Oil Price (Brent Crude)
Data source
Market Data
OPEC's Geopolitical Chess Move
*8% drop matches 2020 COVID crash patterns
Key Developments
- 411k bpd surprise production increase
- Saudi crackdown on quota violators
- Coordinated timing with U.S. tariff announcement
Strategic Implications
- Currying favor with U.S. administration
- Preparing for potential Iran conflict fallout
- Pressure on Russia/Iran oil revenues
Is This a Price War?
The steep price decline stirred memories of past oil price wars, like the Saudi-vs.-shale clash in 2014-2015 and the brief Saudi-Russia price war in 2020. However, insiders caution this isn't a full-blown price war – at least not yet. "OPEC is becoming as unpredictable as Trump," quipped one OPEC source, alluding to the unconventional nature of the move.
Notably, the production hike was announced the same day the U.S. unveiled new tariffs, linking these developments in the eyes of many observers. In fact, analysts suggest broader geopolitical calculations underlie the decision: by driving prices down, Saudi Arabia and Russia may be currying favor with U.S. President Donald Trump, who has repeatedly urged OPEC to lower oil prices.
Lower crude prices help offset the inflationary impact of tariffs and align with Trump's renewed "maximum pressure" campaign against Iran's oil exports. As Helima Croft of RBC Capital Markets observes, "Trump will undoubtedly welcome lower prices" even if U.S. oil producers privately worry about OPEC's new willingness to let prices fall.
In effect, OPEC's oil strategy is serving multiple aims: disciplining its members, appeasing Washington, and preemptively cushioning against potential supply shocks from conflict with Iran.