Oil prices are falling. Economists are cutting forecasts for global economic growth. Oil giants are reporting lower profits.
But on Saturday, eight countries that belong to the oil cartel known as OPEC Plus said they would add about 411,000 barrels of oil a day in June. The move, which follows a similar step by the group to increase oil production at their April meeting, is a major shift in policy that will ripple through the wider energy industry, hitting profits of oil companies and forcing cutbacks.
The group said in a statement that the market was “healthy” and noted that oil inventories remained low.
Saudi Arabia, the de facto leader of OPEC Plus, is signaling that it is reluctant to hold back millions of barrels a day of oil that it could produce, especially when other members of the group, like Kazakhstan and Iraq, are not observing their agreed-upon production ceilings.
“The view from Saudi Arabia, in particular, is that they no longer want to be the ones carrying the heaviest burden if other countries in the group are not showing sufficient commitment to doing their part,” said Richard Bronze, the head of geopolitics at Energy Aspects, a London research firm.
Demand for oil has not weakened significantly. Oil consumption increased by 1.2 million barrels a day in the first quarter of 2025, the most since 2023, according to the International Energy Agency in Paris. Analysts there and elsewhere, though, are cutting their forecasts for demand in anticipation of disruption from global trade tensions, which has already slammed prices.
Prices of Brent crude, the international benchmark, have fallen close to 20 percent since April 3, when the Saudis and other producers signaled they would increase production.
The price of West Texas Intermediate, the American benchmark, slipped this week below $60 a barrel, a threshold where many producers can no longer make a profit, and analysts say that prices could fall further. Under such pressures, producers with higher costs, like shale drillers in the United States, which have been increasing output in recent years while OPEC restrained production, may be forced to cut back.
“Mr Global” aka Matt Randolph, makes the point, which I think is correct, that a certain amount to fossil gas comes from fracked oil wells, and that as rig counts go down, gas production will fall along with oil, and gas prices will rise.
This could bump up the cost of electricity.
I spoke to a well informed friend this afternoon who told me that the price of gas is passed through to consumers in somewhat different ways in different states, or different electric providers.
Generally, State regulators understand that the price of gas is historically volatile, and may in some cases allow for generators to make adjustments as they go. Some states have large storage capacity owing to naturally occurring geological formations, and that can help buffer the ups and downs. Some utilities will make multi-year contracts at a given price, but producers are loath to project out to far, simply because of the aforementioned variability.
Accounting methods will seek to smooth out the cost of gas from month to month, to soften the winter or summer spikes in gas demand.
But overall, as Joe Dominguez, CEO of Constellation energy, recently told CNBC, “Natural gas sets the price of electricity in America, over 90 percent of the time.”
Anyway, watching what happens in this moment will be a great way to learn some of the dynamics of energy markets. Randolph says we will see a crash in oil prices on Monday, May 5. We shall see.
Some of the gas supply for the market comes as a side product of oil wells, so shutting down oil wells drives total gas supplies on the market down. That means that gas-only plays can charge more to respond to the drop in supply. (Mr. Global didn’t explain the underlying reason.)
D’oh!
I posted that comment just after watching the first Mr. G video, so of course I didn’t see where you had included that observation in the text below.
The problem with Mr. Global is that whatever happens to some energy price, he can find something to complain and rant about. If the price of gas goes down, yes some producers are going to lose by being priced out of the market, but people who use gas like those in industries that make things benefit.
Mr. Global has been warning about the price of natgas in the US (still a dominant fuel cost on most of our grids) going up, with contributing factors (1) the global market price, and (2) shutting down unprofitable oil wells.
In the summer we’ll feel it because natgas sets the utility price when air conditioners are running much more often, and in the summer people who still heat with gas furnaces will feel it. Industries that use natgas as feedstock will feel that high price of gas cutting into their margins.
Mr. Global’s “rants” are more against the uninformed political predictions people make when spouting “drill baby drill” or making claims about oil and gas industry when the reality on the ground—and in the boardrooms—is moving in the opposite direction.
“in the winter people who still heat with gas furnaces”