Jul 21, 2025
OPEC is strategizing for the long term.
OPEC's leader, Haitham al Ghais, stated last month in Canada that there is no anticipated peak in oil demand, as it will continue to rise with global population growth, and OPEC is prepared to meet this demand.
A month later, Reuters reported that strong demand is outweighing the effects of a higher-than-expected OPEC+ output increase for August, with prices rising post-announcement due to uneven supply boosts.
When OPEC+ initially revealed plans to unwind their 2022 production cuts, reactions varied, with some believing it aimed to undercut U.S. shale, while others thought Saudi Arabia had no choice due to unsatisfactory price increases. Different interpretations exist, but OPEC has not endorsed any specific view.
Despite OPEC reversing cuts and increasing supply, prices have not plummeted as analysts expected. This is partly due to unrelated geopolitical factors, such as U.S.-China trade discussions and Canadian wildfires, along with EU sanctions against Russia, which OPEC views favorably for price support.
Analysts suggest OPEC is focused on regaining market share after years of reduced production. Bank of America’s Francisco Blanch referred to it as a “long and shallow” price war, primarily targeting U.S. shale, which has become more resilient yet remains vulnerable to lower prices.
Kpler’s Amena Bakr noted that OPEC's strategy also aims to restore group cohesion amidst non-compliance with cuts, necessitating a gradual supply return to maintain market stability.
Geopolitical factors have recently aided OPEC, with prices rising on concerns over potential U.S.-Iran tensions, as well as U.S. congressional actions on new sanctions against Russia's energy sector.
In addition, a lack of new discoveries from non-OPEC producers is supporting OPEC's position; since 2020, new non-shale discoveries have dramatically decreased. The IEA's forecasts on rising oil demand, driven by increasing EV sales, may also be overly pessimistic as the demand landscape evolves.
In this context, OPEC can afford to be patient, as U.S. shale may slow down, and a lack of new discoveries could limit supermajors’ growth. Therefore, even if peak oil demand is reached, it may stabilize rather than sharply decline, which OPEC would gladly facilitate.
A month later, Reuters reported that strong demand is outweighing the effects of a higher-than-expected OPEC+ output increase for August, with prices rising post-announcement due to uneven supply boosts.
When OPEC+ initially revealed plans to unwind their 2022 production cuts, reactions varied, with some believing it aimed to undercut U.S. shale, while others thought Saudi Arabia had no choice due to unsatisfactory price increases. Different interpretations exist, but OPEC has not endorsed any specific view.
Despite OPEC reversing cuts and increasing supply, prices have not plummeted as analysts expected. This is partly due to unrelated geopolitical factors, such as U.S.-China trade discussions and Canadian wildfires, along with EU sanctions against Russia, which OPEC views favorably for price support.
Analysts suggest OPEC is focused on regaining market share after years of reduced production. Bank of America’s Francisco Blanch referred to it as a “long and shallow” price war, primarily targeting U.S. shale, which has become more resilient yet remains vulnerable to lower prices.
Kpler’s Amena Bakr noted that OPEC's strategy also aims to restore group cohesion amidst non-compliance with cuts, necessitating a gradual supply return to maintain market stability.
Geopolitical factors have recently aided OPEC, with prices rising on concerns over potential U.S.-Iran tensions, as well as U.S. congressional actions on new sanctions against Russia's energy sector.
In addition, a lack of new discoveries from non-OPEC producers is supporting OPEC's position; since 2020, new non-shale discoveries have dramatically decreased. The IEA's forecasts on rising oil demand, driven by increasing EV sales, may also be overly pessimistic as the demand landscape evolves.
In this context, OPEC can afford to be patient, as U.S. shale may slow down, and a lack of new discoveries could limit supermajors’ growth. Therefore, even if peak oil demand is reached, it may stabilize rather than sharply decline, which OPEC would gladly facilitate.