The price of Brent crude ended the week at $61.29 after closing the previous week at $65.83. The price of WTI ended the week at $58.29 after closing the previous week at $63.02. The price of DME Oman crude ended the week at $61.31.
Last week, we highlighted the concerns about weak demand and oversupply, with signs that OPEC+ was no longer able or willing to align supply with demand in a proactive manner to support oil prices. It has been our view that it is essential for OPEC+ to communicate and demonstrate that its members will maintain cooperation and discipline to stabilize the oil market in the face of economic uncertainty. On May 3, members of OPEC+ agreed to increase supply by 411,000 bbl/d in June after increasing supply by a similar amount in May, which was three times the amount previously indicated. It is also being reported that OPEC+ is likely to continue the level of supply increases in July – and will continue to do so in August, September and October – if the chronic over-producers (including Kazakhstan, Iraq and Russia) not only comply with previously agreed quotas but also reduce supply further to account for early oversupply. The result of the actions by OPEC+ will be that the unwinding of the voluntary cuts of 2.2 MMbbl/d will be completed in November of this year, instead of September 2026, which was agreed to last December.
The increased volumes from OPEC+ will put pressure on higher-cost producers, including shale oil producers in the U.S. While there are concerns about OPEC+ overproducing, the threat of low prices is putting pressure on US shale producers. As we highlighted last week, our upstream team has recently completed a breakeven analysis of U.S. shale oil producers operating in the major oil plays – Permian, Eagle Ford, Bakken and Denver-Julesburg (D-J). The breakeven analysis was done for the following tiers: operating breakeven, debt service breakeven, sustaining capex breakeven, and dividend sustaining breakeven. The analysis highlights the Permian Basin's sustained competitive advantage. With the next-to-lowest operating breakeven of $42.90/bbl. and the lowest capex breakeven of $68.17/bbl. In contrast, higher-cost basins such as the Bakken and D-J present more fragile financial structures. The Bakken’s capex breakeven of $83.88/bbl. and dividend breakeven of $92.74/bbl. indicate that most operators are currently unable to sustain drilling and distributions without relying on debt or cash from higher-margin assets. Similarly, the D-J Basin—while lower cost than the Bakken—still struggles with a dividend-sustaining breakeven of $80.58/bbl. These dynamics limit both growth and shareholder return and may lead to reduced rig activity, delayed completions, or a shift toward only high-return zones in 2025.
The news about OPEC+ overshadowed some positive economic news from last week. The U.S. jobs report showed that the U.S. added 177,000 jobs in April, which was greater than expected. Also, the average hourly earnings increased by only 0.2% with respect to the previous month and by 3.8% on an annual basis, which is the lowest increase since July 2024. Additionally, there were signs that China and the U.S. are getting closer to initiating discussions pertaining to trade and tariffs. So, while the equity markets moved up on positive economic news, oil prices moved in the opposite direction.
Looking forward, despite the positive news about tariffs, the trade situation remains volatile, and it is likely that there will be more ups and downs before resolution – and until there is resolution – actions by OPEC+ will be the primary driver of oil prices. While there is plenty of geopolitical unrest, so far, the unrest has had a limited impact on oil prices and the same goes for oil-related sanctions. President Trump has imposed sanctions on Venezuela, which has resulted in a supply reduction of around 200,000 bbl/d and he is threatening to expand sanctions on Iranian oil and Russian oil. However, until there are signs that material volumes of oil are being affected, we do not expect that sanctions will have much impact on oil prices. As such, if OPEC+ moves forward with unwinding its supply cuts at an accelerated pace, the price of Brent crude could approach $50.
For a complete forecast of crude oil and refined products and other energy-related fundamentals and prices, please refer to our Short-term Outlook.
About the Author: John E. Paisie, president of Stratas Advisors, is responsible for managing the research and consulting business worldwide. Prior to joining Stratas Advisors, Paisie was a partner with PFC Energy, a strategic consultancy based in Washington, D.C., where he led a global practice focused on helping clients (including IOCs, NOC, independent oil companies and governments) to understand the future market environment and competitive landscape, set an appropriate strategic direction and implement strategic initiatives. He worked more than eight years with IBM Consulting (formerly PriceWaterhouseCoopers, PwC Consulting) as an associate partner in the strategic change practice focused on the energy sector while residing in Houston, Singapore, Beijing and London.