Oil Market Update – Fundamentals vs OPEC vs Trump

OPEC announced the intent to proceed with planned production increases in Apr-25 on Monday, counter to our (and most of the market’s) expectations. One interpretation of OPEC’s decision to proceed as planned with the unwind is the group simply have a more positive view on forward fundamentals (i.e. that the outperformance / tighter than expected fundamentals seen in Q1-25 will continue through the year). Ultimately, consensus views on the strong chance of a deferral last Monday were based on bearish forward balances, which may not materialise. We must also consider the Trump factor, if any – in an era of unpredictable US policy and transactional policy making, it is perhaps better for OPEC (and Saudi in particular) to stay on Trump’s good side. Trump has mentioned OPEC on social media posts in recent months, but we have noted the frequency has diminished relative to the concentration of posts around key OPEC decisions during Trump 1.0, and no posts were noted following the OPEC decision on Monday evening. In a Trump-driven market regime where any news is bad news, avoiding being put on blast can be taken as a win. Given our views on Iran (limited declines due to maximum pressure 2.0) and non-OPEC supply performance this year (much improved relative to 2024), we see limited room for OPEC+ unwinds in 2025, and the group will ultimately have to pause supply increases. For all of the talk about tracking market variables in terms of guiding production decisions, we think that prices are a strong driver of OPEC policy – as such, the market’s requirement to effectively pause OPEC’s unwinds (rather than just keep oil off the market as per the previous dynamic) implies more violent price action to the downside and lower price trajectory than our previous forecasts . We have subsequently lowered our Brent forecast, expecting Brent to average $70/bbl in 2025, vs $73/bbl previously. We see Cal-26 at $6 6 /bbl.