Crude oil saw a steep sell-off, with prices falling over 5% at one point, marking their lowest levels in more than four years. West Texas Intermediate (WTI) briefly dipped to $55 per barrel before recovering slightly to hover around $57.
The sharp drop followed news that OPEC will increase oil production by 441,000 barrels per day in June. This move adds pressure to an already fragile market, facing widespread uncertainty over both U.S. and global economic prospects—particularly in light of unresolved trade tensions.
Goldman Sachs projects that OPEC will continue ramping up output, with an additional 410,000 barrels per day expected in July. At the same time, U.S. production is forecast to remain steady at nearly 13 million barrels per day through 2026, according to the Energy Information Administration. However, current price levels are well below breakeven for many producers, potentially discouraging further investment, as noted by the Wall Street Journal.
Demand-side risks persist as global markets remain jittery. Despite recent efforts by former President Trump to ease tariff policies—suspending duties on most nations except China and initiating dialogue to reduce trade tensions—uncertainty lingers. U.S.-China negotiations have yet to yield meaningful progress, and China is still weighing Trump’s proposal to reduce tariffs to 145%.
Adding to market anxiety are fresh geopolitical developments. Over the weekend, Yemen’s Houthi rebels reportedly struck near Israel’s Ben Gurion Airport with a missile that bypassed multiple advanced air defense layers. Israeli officials blamed Iran, the Houthis’ primary backer, raising the risk of a wider conflict.
This escalation comes amid a stalemate in U.S.-Iran nuclear talks and aligns with Israeli Prime Minister Benjamin Netanyahu’s push for a military solution—one that could potentially pull the U.S. into a deeper regional confrontation. A broader conflict would pose serious threats to oil infrastructure and major shipping routes, factors that may have softened the day’s initial market losses.
The missile’s successful breach of both Israeli and U.S. defense networks, including systems deployed in the Red Sea, highlights a troubling vulnerability. Should policymakers take this threat seriously, it could prompt either a strategic de-escalation or a limited military response, reminiscent of the restrained tit-for-tat exchanges between Iran and Israel in late 2024.
As the oil market continues to wrestle with oversupply and global risk, the path forward remains highly uncertain—underscoring the delicate balance between supply dynamics, geopolitical instability, and investor sentiment.
