Oil prices are experiencing volatility in May 2025 due to a combination of factors, including renewed threats of sanctions by former U.S. President Donald Trump against Iran and ongoing discussions within OPEC+ regarding potential output hikes. These events are creating uncertainty in the market, impacting both supply and demand forecasts.
Trump's Sanctions Threat
Former President Trump has threatened secondary sanctions on any country or individual purchasing Iranian oil or petrochemical products. This announcement followed the postponement of a fourth round of U.S.-Iran talks, initially scheduled for Rome. The potential enforcement of these sanctions could significantly reduce oil supply, adding upward pressure on prices.
OPEC+ Output Deliberations
Several OPEC+ members are considering accelerating oil output hikes in June for the second consecutive month. Eight OPEC+ countries are scheduled to meet on May 5, 2025, to decide on a June output plan. However, Saudi Arabia has indicated it is unwilling to support the oil market with supply cuts, adding further complexity to the situation. The potential for increased output could counteract the impact of sanctions on Iran, leading to downward pressure on prices.
Economic Factors
Data released recently indicated a contraction in the U.S. economy during the first quarter of 2025, partly attributed to increased imports as businesses sought to avoid higher costs from tariffs. Concerns about a potential global recession due to trade tensions are also weighing on the oil market, creating a complex interplay of factors influencing price movements.