Oil sinks as Saudi Arabia slashes prices ahead of Opec+ output boost

Vijay Valecha, The National, April 7, 2025

Oil prices plunged nearly 4 per cent on Monday as Saudi Arabia cut the official selling prices for its oil by the most in more than two years ahead of a production boost scheduled for next month.

Saudi Aramco, the world’s leading oil exporting company, on Sunday slashed crude oil prices for Asian buyers for May, after the Opec+ alliance of oil-producing countries on Thursday announced larger-than-expected output increase in a surprise move.

The group said it will add 411,000 barrels a day to the market next month, rather than 137,000 bpd as earlier announced.

Additionally, global holdings in bullion-backed ETFs have surged to their highest levels since September 2023.

Brent, the benchmark for two thirds of the world’s oil, was down 3.78 per cent at $63.10 a barrel at 12pm UAE time on Monday. West Texas Intermediate, the gauge that tracks US crude, was 3.95 per cent lower at $59.54 a barrel.

“Opec+ continues to highlight flexibility and the actual supply increase could eventually be much less than outlined. Demand conditions will be essential, and actual adherence to the compensation plans,” Monica Malik, chief economist, Abu Dhabi Commercial Bank, told The National.

“The GCC remains less impacted than other EM [emerging market] economies, providing a comparative advantage.”

The intensifying trade war and concerns it could lead to a global recession and dent crude demand, also dragged oil prices lower. Crude plunged to its lowest levels in more than three years on Friday, as China hit back against US President Donald Trump's tariffs with its own additional levies on US goods.

The drop of 17 per cent in crude prices over the last five sessions, is "enormous even for a volatile asset like crude oil",Vijay Valecha, chief investment officer at Dubai-based Century Financial, said.

“Oil prices are currently suffering from the double whammy of possible surplus gluts, based on the latest Opec decision and the expectations of a significant drop in demand due to the possibility of a global recession,” he told The National.

“With the ongoing market sell-off happening at a frenzied pace, the probability of a global recession rises with each passing day.”

Swiss lender UBS expects volatility in crude markets to remain stay high in the short term.

Source

The National