OPEC is quietly executing a long-term strategy to reclaim market share, betting that oil demand will remain resilient despite growing chatter about an energy transition. While the group begins to unwind production cuts, crude prices have held steady, thanks largely to geopolitical tensions, weak non-OPEC supply growth, and persistent global demand.
“OPEC sees no peak in oil demand on the horizon,” Secretary-General Haitham Al Ghais stated recently in Canada. He argued that a growing global population will continue to push up consumption, and OPEC will be there to meet that demand.
Production Rises, But So Do Prices
Last month, OPEC+ surprised markets with a bigger-than-expected production hike for August. Conventional wisdom suggested this would depress prices. Instead, crude benchmarks edged higher, reflecting a tight supply outlook compounded by U.S.-China trade friction, new EU sanctions on Russia, and supply outages in Canada.
OPEC’s decision to reverse production cuts, first implemented in 2022, sparked debate among analysts. Some believe the group is trying to squeeze U.S. shale once more. Others suggest Saudi Arabia, which shouldered the bulk of the cuts, had no choice but to boost exports after failing to lift prices. Still others see it as political maneuvering to curry favor with Western powers.
Regardless of the motive, one fact stands: prices remain firm despite more barrels entering the market. And that plays directly into OPEC’s hands.
Not a Price War—Yet
Francisco Blanch, head of commodities research at Bank of America, calls the strategy a “long and shallow price war.” In his view, the Saudis are targeting U.S. shale producers, whose cost structures remain vulnerable even after years of streamlining.
Unlike previous market-share battles, OPEC is moving slowly. By doing so, it avoids flooding the market while gradually clawing back share surrendered during the production restraint period.
Cohesion Among Members Returns
Beyond market tactics, the production shift reflects internal pressures. Compliance with cuts has been uneven. Some members continued pumping above their quotas, frustrating more disciplined producers.
According to Kpler’s Amena Bakr, OPEC leaders felt the need to restore “a sense of fairness” within the bloc. The new approach—an orderly return of barrels—aims to prevent a chaotic supply surge that could crash prices. “It’s about group cohesion as much as market strategy,” Bakr wrote in The National.
Geopolitics Buoys Prices
OPEC’s playbook is further strengthened by a series of geopolitical disruptions. Recent U.S.-Iran nuclear tensions rattled markets after Tehran threatened military strikes on American bases in the Middle East. Fresh sanctions from the U.S. Congress targeting Russia’s energy sector added more upward pressure.
Meanwhile, the EU’s vow to ban even refined products made with Russian crude signals growing resolve, though past sanctions have delivered mixed results.
These tensions offer OPEC cover. With prices elevated for reasons outside its direct control, the cartel can gradually restore output while appearing market-neutral.
Non-OPEC Supply Hits a Wall
Adding to OPEC’s leverage is the slowdown in new non-OPEC supply. The Financial Times recently cited a Goldman Sachs report showing that since 2020, global oil discoveries (excluding U.S. shale) have plunged to just 2.5 billion barrels annually, only a quarter of pre-pandemic levels.
This slowdown undermines the belief that international oil majors can outpace OPEC with new production. As discoveries decline, OPEC’s reserves gain strategic value.
The International Energy Agency, long skeptical of future oil demand, points to electric vehicle (EV) adoption as a key driver of consumption decline. Yet the reality is murkier.
EV sales in the U.S. are now slowing. In Europe, a rebound is driven largely by subsidies, whose longevity remains uncertain. China, despite its EV boom, still sees rising oil demand, and even its own state oil firms are beginning to question when demand might peak.
Peak Demand Is Not the End
Even if global demand does peak, OPEC’s position remains strong. Peak does not mean collapse; it means a plateau that must be sustained. Supply must keep pace with consistent demand at high levels. This is where OPEC excels.
The group can now wait patiently. U.S. shale will likely pull back if prices weaken. The lack of major new discoveries will curb future supply growth. And geopolitical instability may continue to tighten the market.
OPEC’s ability to adapt, coupled with market tailwinds, suggests the cartel is well-positioned for the long haul. It may not need to fight for dominance, just hold its ground until the world comes back to it.