OPEC has increased production, but oil prices have not really come down and traders weigh supply risks as geopolitics continue to outweigh oversupply concerns from OPEC+ output hikes.
Benchmark crude Brent is now close to $68/b, as traders weigh concerns that Russian supply could be disrupted by more US sanctions and Ukrainian attacks targeting energy infrastructure in Russia.
OPEC+ announced early September that oil output will increase by 137,000 b/d for October, while OPEC is holding 2025 oil demand growth steady at 1.3 million b/d, led by Asia, the Middle East and Latin America.
OPEC+ crude oil production rose more than 500,000 b/d in August, with virtually all the gains coming from Saudi Arabia, Iran, the UAE, Russia and Kuwait.
The US is asking its allies to impose tariffs on anyone buying Russian oil, mainly India and China. But Europe and Japan want to lower the G7 oil price cap.
India continues to buy Russian crude despite the new US tariffs of up to 50% on exports. Russian oil now makes up 37-40% of India’s imports in comparison to <1% pre-war. Citi warns tariffs could shave 0.6-0.8% off its GDP growth.
Meanwhile, the myth of peak fossil-fuel demand is crumbling.
For the last few years, climate and energy policymakers, driven by the IEA, have convinced themselves the world was inexorably moving away from fossil fuels. But a new IEA report about to be released shows that it is not.
Based on a new ‘Current Policy Scenario’ (CPS), which reflects actual policies being implemented, the IEA now shows that oil demand is likely to continue rising up to 114 mln b/d by 2050, as will gas and coal demand. This may force narratives of stranded assets to be revised.
US energy secretary Chris Wright agrees.
He said that, “the demand for oil is growing at over a million b/d every year. I worry more in the next five or ten years, where’s that oil going to come from?”
The oil market appears to be tighter than consensus believes.
Chronic under-investment has led to less spare capacity and tighter forward balances to the extent that prices may not come down. This has put Saudi Arabia in the driver’s seat going forward.
OxfordEnergy (OIES) also says that an oil market glut is not visible in stocks or spreads.
According to Trafigura, oil demand growth in India looks set to outpace China’s underlying gains this year.
In the meanwhile, global upstream oil investment is set to fall for the first time since 2020 The 6% drop is driven mainly by a decline in the US shale sector.
Asia will remain the world’s largest and fastest-growing market for energy services through at least the middle of the century, ensuring it remains the most important market for companies and countries exporting oil and gas.
The EIA sees lower oil prices in 2026 in its latest outlook. It expects Brent to decline to around $51/b in 2026, due to increased inventories and global supply growth. Goldman also sees Brent at below $55/b in 2026.
For now, as low crude prices bite, big oil companies are slashing jobs and investments, with the US shale industry hit particularly hard.
There are reports that Russia has made a discovery of a potential 511 billion barrels of oil beneath the Antarctic seabed, sparking global controversy.
Dr Charles Ellinas, Councilor, Atlantic Council
