Brent crude prices closed at $60.23 per barrel on 5 May 2025 following two consecutive oil production increase announcements by Opec+, marking a 27% year-on-year decline. Market analysts forecast prices to average between $60 and $65 per barrel for the remainder of 2025. In an exclusive interview with Paperjam, Manuel Maleki, deputy director of economic research at Edmond de Rothschild, said the moves represent a push by Saudi Arabia and its allies to reassert control over the global oil market.

On 3 April 2025, eight Opec+ members, which includes Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman, jointly announced an increase of 441,000 barrels per day (bpd). A second hike of the same volume followed on 3 May. These coordinated increases contributed to the continued drop in oil prices, with Brent crude now trading near four-year lows. According to Maleki, “the Opec+ decision was expected. The question mark was linked to the level, but clearly, Saudi Arabia wants to confirm its leadership on the cartel, and more globally on the crude oil market.”

Four drivers behind the decision

Maleki outlined four key motivations behind the sudden decision to raise output.

1. Sanctioning non-compliant members: Saudi Arabia’s move aimed in part to sanction members such as Iraq and Kazakhstan, who have repeatedly breached their production quotas. “Riyadh is putting pressure on these members to comply with the established agreements,” said Maleki. Whilst Kazakhstan produces around 2m bpd--about 2% of total global output--its influence is relatively minor. Iraq, with over 4m bpd, has more at stake. “Several members want to punish free-riders and are ready to push the price lower to reach their goal,” he added.

2. Responding to political pressure from the United States: US president Donald Trump has intensified calls for lower fuel prices in the run-up to elections, urging increased oil supply. “Trump has stepped up his calls for increased production to bring down petrol prices in the US, particularly during the election period. This political pressure may have influenced Opec+’s decision, especially as Trump is expected in Saudi Arabia later this month to discuss energy and security issues,” Maleki noted. He added that Saudi Arabia may also be strategically targeting the US shale sector. “By pushing the price lower, Saudi Arabia put the pressure on the US crude oil industry which needs a barrel, in average, at more than $60 to continue to increase the number of wells. Even if the US president wants a lower oil price, crude oil industry is crucial for Republican states such as Texas.”

3. Defending global market share: Opec+ currently holds roughly 40% of global oil production and is seeking to maintain this share amid growing output from non-Opec nations including the United States, Canada and Brazil. “By increasing its production, Opec+ is trying to discourage investment in higher-cost projects by keeping prices low,” said Maleki. Moreover, “the current average breakeven price for US companies is around $60 per barrel,” which makes pumping oil unprofitable for US producers if global prices remain low. Opec and Saudi Arabia “used this strategy in 2016 to put the pressure on the non-conventional crude oil US companies to conquer new markets shares,” noted Maleki.

4. Anticipating higher seasonal demand: The cartel is also preparing for an expected increase in fuel consumption during the northern hemisphere’s summer months. “The approach of the summer season in the northern hemisphere, a period traditionally associated with a rise in fuel consumption, also justifies an increase in production,” he explained.

Further output increases expected

“Opec+ would continue increasing oil production in the coming months,” asserted Maleki. He expects the cartel to bring up to 2.2m barrels per day of additional oil to the market by November 2025, of which 882,000 is already announced, as part of its plan to unwind earlier cuts. He added that “increasing production could continue in case of a relative small impact on the price,” provided there are no escalating tensions among Opec+ members and no renewed US pressure to raise prices in support of its domestic crude oil industry.

Price effects reaching Luxembourg

The price drop has already filtered through to consumers in Luxembourg, where petrol and diesel prices have fallen by 4% and 9% respectively since January. Maleki noted that the ministry of the economy sets maximum retail fuel prices, which distributors rarely undercut.

Using figures from Luxembourg’s national statistics agency, Statec, Maleki explained how fuel prices respond to crude price changes. “Between 2019 and 2020, for a 20% drop in product and distribution costs, we see a 12% drop in total price,” he said. “Here again, for a 1% drop in product-related costs, the total price falls by 0.6% [at the pump].” He added that under current conditions, further reductions in product and transport costs could be passed on to consumers by about half.

Outlook

Fuel prices are expected to remain subdued in line with global oil trends. “Fuel prices react almost at the same time as crude oil prices. They will therefore benefit from lower pump prices as long as oil prices do not rise,” Maleki stated.

Regarding broader economic consequences, particularly for eurozone inflation, Maleki advised caution. “It is too early to conclude to secondary effects on eurozone inflation, to obtain these types of effects, the price has to be low for several months with less volatility. Currently this not the case.”