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Opec+ said it will proceed with a plan to increase oil production from April, in an unexpected move by the cartel that sent crude prices tumbling.
Saudi Arabia and seven other members of the Opec+ group had previously delayed a plan to unwind long-standing output cuts several times and traders had widely expected it to be postponed again.
But Opec+ said on Monday it had agreed to proceed with the “gradual and flexible return” of 2.2mn barrels a day of oil production over the next 18 months.
The price of Brent crude fell by 2 per cent to less than $72 a barrel, the lowest level in almost three months, following the Opec+ announcement, as traders responded to the prospect of increased supply.
Concerns about the potential impact of US tariffs on economic activity were already weighing on crude prices, which are down more than 10 per cent from a high this year of $82 a barrel in January.
US President Donald Trump confirmed on Monday the US would impose 25 per cent tariffs on goods imported from Canada and Mexico from midnight local time on Tuesday.
“Two things are hitting the market at the same time, Trump’s tariffs and the Opec+ restart of halted production,” said Kevin Book, co-founder of ClearView Energy Partners, a research firm. “It is no surprise that this creates a sell signal to traders.”
Trump called on Opec+ to push down oil prices during a speech in January to executives at Davos.
Opec+ had initially intended to begin unwinding the group’s output cuts in September but delayed the plan three times.
The eight countries that will increase production from April are Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman.
All other existing production cuts would remain in place, a statement by Opec+ said.
“This gradual increase may be paused or reversed subject to market conditions,” the group added. “This flexibility will allow the group to continue to support oil market stability”.
Three different sets of output cuts mean Opec+ members are producing almost 6mn b/d less than their combined capacity, representing about 6 per cent of global oil supply.
Saudi Arabia has shouldered the majority of the cuts to date, reducing its own production by 2mn b/d in the past two years.
The policy has at times inflamed tensions with the US, which tried and failed to get Riyadh to boost production in 2022 after Russia’s full-scale invasion of Ukraine sent oil prices soaring.
The Financial Times reported in September that for the first time in several years, Saudi officials were ready to bring back production, even if it led to a prolonged period of lower prices.
Amrita Sen, founder and director of research at Energy Aspects, a research firm, said the outlook for supply and demand meant there was space for Opec+ to “gradually add barrels before the summer”, with the prospect of oversupply only emerging towards the end of the year.
“The group may choose to pause then,” she added.
