Crude oil futures plunged by the most in nearly three years on Thursday, as concerns about weaker demand due to U.S. tariffs were exacerbated by the surprise move from OPEC+ to accelerate the return of withheld production, sending shockwaves across oil markets.

President Trump's onslaught of tariffs is ratcheting up doubts about the outlook for the global economy, and while the administration steered away from actions that would directly affect oil markets - such as measures that would have curbed flows from Canada and Mexico - concerns that the trade war will sap global energy demand hammered prices.

Then, OPEC and its allies unexpectedly said they would add 411K bbl/day of output back to the market starting next month - the equivalent of three monthly increases in a single step - citing "healthy market fundamentals" and a "positive market outlook," but a striking policy shift after years of supply constraints that had supported crude prices.

The cartel had been scheduled to raise production by 135K bbl/day in May as part of a plan to gradually unwind past cuts totaling 2.2M bbl/day.

"The perfect bearish cocktail has been mixed in Washington and in Vienna," PVM Oil Associates analyst Tamas Varga said in response to the twin moves. "The reciprocal tariffs on virtually every salient U.S. trading partner justifiably raise the fears of recession and possibly stagflation. Economic and oil demand growth is adversely impacted."

The OPEC+ decision to bring back more production than expected adds downside risk to crude prices, while the negative effect on global growth from U.S. tariffs could curb oil demand growth by 250K-500K bbl/day, “close to half of our 2025 growth forecast of 1.1M bbl/day at the upper end," UBS analysts wrote. "We see the combination of this leading to increased downside risk for crude oil prices towards the lower end of the $55-$75/bbl WTI range."

Citi Research offered a more upbeat view, maintaining its Q2 Brent price forecast of $68/bbl, saying "These withering trade tariff developments arrive at a time when the macroeconomic momentum was already softening... Yet sanctions on Iranian, Venezuelan, and eventually Russian oil purchases act to tighten supply, thereby offsetting impacts from goods tariffs."

Further weighing on market sentiment, data from the U.S. Energy Information Administration showed U.S. crude inventories rose by a surprisingly large 6.2M barrels last week, compared to expectations for a substantial decline.

Front-month Nymex crude (CL1:COM) for May delivery finished -6.6% to $66.95/bbl, and front-month June Brent crude (CO1:COM) ended -6.4% to $70.14/bbl, the lowest settlement value for both benchmarks since mid-March and the sharpest one-day percentage decline for both since July 12, 2022.

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Energy company shares took a beating, with U.S. producers, pipeline companies and oilfield services firms all down sharply, including the top 10 energy names ranked by market value: Exxon Mobil (XOM) -5.2%, Chevron (CVX) -6.2%, ConocoPhillips (COP) -10.2%, Enterprise Products Partners (EPD) -1.7%, Williams Companies (WMB) -4.2%, EOG Resources (EOG) -7.7%, Kinder Morgan (KMI) -4.1%, Energy Transfer (ET) -6.3%, SLB (SLB) -7%, Oneok (OKE) -7.6%.

Also among the day's biggest losers: Patterson-UTI Energy (PTEN) -19%, Liberty Energy (LBRT) -18.4%, APA Corp. (APA) -16.5%, Helmerich & Payne (HP) -15.2%, Valero Energy (VLO) -14.4%, Nabors Industries (NBR) -14.4%, Valaris (VAL) -13.9%, Transocean (RIG) -13.9%, Phillips 66 (PSX) -13.6%, Marathon Petroleum (MPC) -13%, Halliburton (HAL) -12.8%, Noble Corp. (NE) -12.8%, Diamondback Energy (FANG) -12.5%, Devon Energy (DVN) -12.5%, Texas Pacific Land (TPL) -12.2%, Ovintiv (OVV) -11.5%, Occidental Petroleum (OXY) -10.9%, Hess (HES) -7.2%.