- Brent crude oil prices fell sharply due to OPEC+ increasing output by 411,000 barrels per day in May, exceeding previous plans.
- US crude inventories unexpectedly rose, adding to concerns of an oversupplied market
- Technically, Brent crude retested a trendline after a significant drop; the daily candle close is crucial for potential recovery signals.
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Brent crude prices are down as much as 5.6% today as a combination of an OPEC + announcement, a weaker US Dollar and trade tensions weigh. The idea that tariffs will lead to a global slowdown is definitely one of the factors markets are evaluating.
OPEC + to speed up output hikes
Eight OPEC+ countries have decided to increase oil production more than originally planned. Instead of adding 135,000 barrels per day in May, they now plan to add 411,000 barrels per day, as agreed during a meeting on Thursday.
The May increase is part of a plan by Russia, Saudi Arabia, UAE, Kuwait, Iraq, Algeria, Kazakhstan, and Oman to gradually reverse their recent production cut of 2.2 million barrels per day, which started this month.
OPEC+ also has other production cuts of 3.65 million barrels per day in place until the end of next year to help support oil prices.
Unless additional tariffs or direct sanctions reduce oil supply, traders are likely to refocus on the risk of an oversupplied market driving prices down.
Adding to the negative market mood, data from the U.S. Energy Information Administration on Wednesday revealed that U.S. crude inventories unexpectedly increased by 6.2 million barrels last week. This was a sharp contrast to analysts' predictions of a 2.1 million barrel decrease.
Technical Analysis - Brent Crude
This is a follow-up analysis of my prior report “Brent Oil price analysis: volatility ahead as oil breaks above 100-day MA” published on April 1 2025.
From a technical analysis standpoint, Brent has fallen off a cliff today trading down as much as 5.5% at the time of writing.
Having broken above the descending trendline Brent looked poised for further gain earlier this week. However, as discussed in the article on April 1, the fundamentals did not support the technicals completely. Downside risk was always present with growth concerns always likely to arise from the tariff announcements.
However, I did not see the OPEC+ announcement coming, I must admit. I for one believed OPEC+ may hold production steady as growth fears were likely to weigh on prices.
Today's drop has brought a retest of the trendline into play. The daily candle close will be off particular importance with a close above the trendline leaving the door open for a potential recovery.
Whether or not such a recovery will be sustainable however will be the main talking point moving forward.
Immediate support rests at 69.52 before the 69.00 and 68.17 handles come into play.
A move higher will have to contend with the 71.00 handle before looking toward hurdles at 72.38 and 74.44 respectively.
Brent Crude Oil Daily Chart, April 3, 2025
Source: TradingView (click to enlarge)
Support
- 69.52
- 69.00
- 68.17
Resistance
- 71.00
- 72.38
- 74.44
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