Global oil markets are again showing the impact of emotions and misinterpretation. The so-called surprise production increase taken by eight (8) leading members of OPEC is, in principle, not relevant for fundamentals or market stability, as it is only an indication. The presented production increase is based on raising the OPEC production ceiling—not to be taken as opening the valves to flood markets. At the same time, international media are again treating the situation as set in stone, while most headlines indicate that it is a strategic decision made by OPEC+, the ongoing cooperation between OPEC and non-OPEC members such as Russia and Kazakhstan. The latter is entirely incorrect, as the production ceiling decision was made by a select group of OPEC members, excluding Moscow and others.
Where markets are also wrong is in not taking into account that major oil producers and OPEC members, such as Iran, are not even involved in the ongoing discussions regarding the unwinding of OPEC production quotas. Statements like “the global oil market is entering uncharted territory” or “OPEC+ is accelerating its production increases” are based on biased assessments that don’t reflect real facts on the ground. Even the two main production increases announced by OPEC in the last month didn’t result in an oil glut, as most member countries didn’t fill their new quota volumes. Some even needed to cut their existing export volumes to comply with OPEC agreements.
For Russia and others, global oil markets are not determined by OPEC or OPEC+, but by sanctions (in Russia’s case) or the appetite of importers in Asia to absorb volumes. Most analysts also underestimate U.S. shale oil production and the willingness of the world’s largest producer, the U.S., to compete for market share. While drilling is under pressure, U.S. shale oil and petroleum exports continue to rise.
Despite increasing geopolitical and geo-economic conflicts—particularly in the Middle East, Ukraine, and potentially Asia—demand for oil and gas remains robust. This indicates promising upside in the months ahead. China’s latest economic figures show 5% GDP growth in H1 2025, remarkable given the Trump tariff war and broader Western economic pressure.
Doomsday scenarios about peaking demand or an Asian market implosion are driving current bearish oil views. While OPEC has raised production ceilings—137,000 bpd in April, 411,000 bpd in May and June, and now targeting 548,000 bpd in August—prices haven’t collapsed as feared. The extra barrels may pressure prices, but no crash appears imminent.
OPEC-8 strategies need reassessment. Saudi Arabia and the UAE seem to have deprioritized price stability in favor of regaining market share and boosting exports. Unlike past market-share battles, today’s economic conditions appear more favorable, giving producers confidence to act.
Officially, production agreements show increased volumes, but real-world output remains below those levels. Most OPEC producers are still unable to meet their quotas. Thus, fears of a glut are overblown.
The main parties affected won’t be consumers or producers, but international oil companies. While margins may tighten—as Shell has warned—the situation is not dire. Shell’s comments about a fragile H2 2025 shouldn’t spark panic.
Bullish signals remain: renewed Houthi activity in the Red Sea, threats against Iran, Russia’s economic decline, and growing demand for private power generation all support the case for higher oil prices. Despite IMF concerns, ROW markets—especially Africa and Asia—are driving demand growth.
Even in OECD markets, demand stays strong despite EV adoption. One simple fact remains: Western governments earn more from one barrel of oil than OPEC does.
Credit: Oilprice.com
