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EIA: Oil price volatility is due to higher OPEC+ production and tariff uncertainty.

The U.S. Energy Information Administration reported on Tuesday that perceptions of an oversupply by oil market participants due to increased OPEC+ production and uncertainty regarding the economic impact of tariffs has led to a rise in short-term volatility of oil prices.

Oil prices fell to a record low of four years on Monday, after the Organization of the Petroleum Exporting Countries (OPEC+) and its allies agreed to increase oil production for June. Later, it was reported that the group plans to continue speeding up its output increases.

The EIA still expects OPEC+ production to remain below the current target path. The EIA forecast that the supply of oil from the group would increase by 200,000 barrels a day to 42.9 millions bpd this year, compared to the previous forecast.

The unpredictable and often erratic policies of U.S. president Donald Trump have been a major drag in recent months on oil prices, with economists warning that they could slow down global trade and lead to a recession.

The EIA's short-term energy forecast report stated that "the effect of new or additional tariffs on global economic activity, and the associated oil demand, is highly uncertain. This could have a significant impact on oil prices in the future."

The fall in oil prices has prompted U.S. producers to reduce spending and warn that oil production may have peaked with current commodity prices.

EIA expects U.S. crude oil production to reach a lower record of 13,42 million barrels per day this year, down from the previous forecast of 13,51 million barrels per day. The EIA predicted that output will increase to 13.49 millions bpd next year, down from the previous forecast of 13.56million bpd.

The EIA forecast that the average price of U.S. West Texas Intermediate Crude Oil will be $61.81 per barrel in this year. This is a reduction of more than $2 a barrel from its previous estimate.

The agency reduced its forecast for 2025 Brent crude prices to $65.85 per barrel from $67.87 per barrel. Shariq Khan, New York; Nia Williams, editing.

(source: Reuters)