Oil Prices Plummeting Amid OPEC+ Supply Glut and Economic Slowdown
Crude oil prices plummet to four-year minimum due to intensified production efforts by OPEC+.
In a jarring twist for the oil sector, crude prices have tumbled to a four-year low, thanks to mounting worries over an oversupply of oil from Saudi Arabia and a cooling global economy.
Last week, Brent crude, the global benchmark, plunged by over four percent following the oil cartel OPEC+'s decision to ramp up oil production by another 411,000 barrels per day, starting from June 2025, a move that starkly contrasts with recent efforts to bolster higher prices through steep production cuts [1][5].
"This dramatic change in strategy by OPEC+ is a setback for efforts to reinforce higher oil prices," commented David Morrison, a senior market analyst at Trade Nation.
Saudi Arabia, a key player in the alliance, has spearheaded the production boost. Determined to sustain the pace, the kingdom has engaged in a threatening stance, vowing to maintain the aggressive production increases if other OPEC+ nations don't stop exceeding their production quotas [2][3].
According to Chris Weston, head of research at Pepperstone, the OPEC+ conference revealed a fissure within the alliance, with the Saudis demanding unyielding adherence to production limits.
The production escalation happened at a speedier rate than anticipated by traders, exacerbating the downward pressure on oil prices, which were already waning. The U.S. president's trade war played a significant role in driving prices down from around $75 to $65 within a week of the celebration known as 'Liberation Day' due to anticipation of a slump in global economic growth [4].
Furthermore, following the announcement from Saudi Arabia, prices dipped as low as $58 in September 2025, currently hovering at $60.33, a level not seen since February 2021.
Consequently, Goldman Sachs revised its price projections, now projecting that Brent crude will average $60 a barrel for the remainder of the year, a decrease from $63 earlier. "Our overarching belief remains that high spare capacity and high recession risk point to downward risks for oil prices," claimed Goldman analysts.
Interestingly, the drop in the U.S. dollar against the pound amplified the impact of the oil price drop in sterling terms, causing oil to fall by 30 percent since January 2025.
"The situation is similar when examining the twelve-month contract for UK natural gas," underscored Deutsche Bank analyst Shreyas Gopal. "The benefits to the UK consumer stemming from a decline in energy prices are palpable, with lower pump prices bolstering real disposable income."
Intriguingly, Bank of America analysts recently identified London-based Shell as the "most resilient to price fluctuations" among the global oil titans, suggesting that it could maintain profitability even if Brent prices fell to $65 [6].
Despite the unfavorable market circumstances, analysts expect Shell to continue robust buybacks, with a planned spend of $14 billion in 2025, while predicting a 55 percent decrease in share buybacks from rival BP, aiming to purchase only $3 billion of shares in 2025.
A recent buzz has surfaced, hinting at the possibility of Shell launching a takeover bid for BP, following the latter's significant restructuring to streamline its investments in renewable energy [7]. However, it is essential to note that any such speculation requires confirmation from the involved parties.
- The plummeting oil prices have introduced a challenging period for the oil-and-gas industry, with the economy and finance sectors likely to feel the ripple effects.
- The decline in oil prices and the subsequent decrease in energy costs could potentially boost the business sector, offering benefits to the UK consumer.
- Amidst the turbulent oil market, the finance industry is closely observing the strategies of oil giants like Shell and BP, particularly their investment decisions in the oil-and-gas sector and potential mergers and acquisition moves.
