Oil prices resumed their downward slide after the OPEC Plus cartel of oil producers said over the weekend that it would pump more oil, even though analysts say demand could fall if President Trump’s trade war curbs economic growth.
The U.S. benchmark oil price was trading around $57 a barrel on Monday morning, down from $58 on Friday and close to $65 in mid-April.
Mr. Trump has said he would lower energy costs for Americans and called for increased drilling. But for many oil and gas executives in the United States, who were big donors to the president’s campaign, the steady price decline means it will not be profitable to drill new wells.
The leaders of OPEC Plus appear to be making a calculated decision to raise production even if that lowers prices — and, thus, how much money they make from selling oil — for geopolitical reasons. They want to punish cartel members that have been producing more than the quotas they agreed to, analysts said. The cartel’s de facto leader, Saudi Arabia, also wants to strengthen its ties to Mr. Trump, according to energy experts.
Prices briefly fell to around $55 a barrel in early April, just before Mr. Trump said he would pause reciprocal tariffs on most countries for 90 days. That announcement led to rallies in both the stock and the oil markets, though oil prices have since waned.
That is partly because OPEC Plus is raising output at the same time that economists are warning that higher tariffs on most American trading partners will slow global economic growth and potentially cause a recession in the United States.
The countries that make up OPEC Plus said on Saturday that they would further ramp up production in June.
The oil cartel had agreed to production cuts as a way to bolster prices, but analysts said Saudi Arabia has grown weary of pumping less oil while other countries, like Kazakhstan and Iraq, surpass their production quotas.
OPEC Plus has pressured Kazakhstan to curb its output, which was 400,000 barrels a day above its ceiling in March, according to the International Energy Agency. But the country seems unwilling to constrain investors like Chevron, which spent nearly $50 billion to expand its Tengiz oil field in Kazakhstan with the intention to pump an additional one million barrels a day.
The increased production may also be a sop to Mr. Trump, who has pushed producers to pump more oil to lower prices. The president is expected to travel to Saudi Arabia and other countries in the Middle East soon.
While lower prices help American consumers, they hurt the large and politically important U.S. oil industry, which has an outsize presence in states like Alaska, Louisiana, New Mexico and Texas.
Some companies are already pulling back. There are about 9 percent fewer rigs drilling wells in the Permian Basin, the top U.S. oil field, than there were this time last year, when oil was trading near $80 a barrel, according to Baker Hughes.
On Friday, Exxon Mobil and Chevron, the two largest U.S. oil and gas companies, reported their lowest first-quarter earnings in years. Those results reflect the market before Mr. Trump further escalated tariffs on China in early April.
“It is clear that this uncertainty is weighing on economic forecasts, causing significant volatility and raising the prospects of slower growth,” Darren Woods, Exxon’s chief executive, told analysts.
Stanley Reed contributed reporting.
