OIL PRICES AFTER THE WEEKEND’S OPEC MEETING
Crude oil is the lifeblood of the global economy and is shaped as much by politics and policy as it is by demand and supply. Despite geopolitical threats to supply oil prices were under pressure in 2025 as oil cartel OPEC added to production and trade concerns around the world trimmed global demand. As new crises emerge, it’s important to remember that it is usually a combination of factors rather than a single issue which influences oil price movements.
- WHAT IS OPEC?
OPEC plays a major role in managing global oil supply. Its stated aim is to balance the global oil market. It consists of major oil producers, including Saudi Arabia, its de facto leader and many other Middle East members. In late 2016, Russia joined OPEC+ as a country that participates in OPEC decisions. Together, the cartel accounts for around 40% of global supply, meaning its decisions are likely to impact oil prices.
- WHAT HAPPENED AT THE LATEST OPEC+ MEETING?
OPEC+ met on Sunday, January 4 and the group did very little, which was actually the message.
Key producers agreed to keep output unchanged, extending existing supply curbs into the first part of the year. Despite global political tensions, even between OPEC members, there was no attempt to talk prices higher with promises; the focus stayed firmly on market balance and steered clear from politics such as the Venezuelan situation.
That approach reflects the fact that prices fell sharply last year, and OPEC+ is wary of adding more oil into a market that hasn’t shown it can absorb. Holding steady avoids additional price pressure.
- WILL OPEC CHANGE ITS POLICIES THIS YEAR?
For now, the answer appears to be no. But that doesn’t mean policy is decided for the year. OPEC+ has made it clear that future decisions will depend on how demand and inventories (supply) evolve. If stocks continue to build and prices remain under pressure, deeper restraint could come back into the conversation. On the other hand, if the global economy grows and oil demand picks up significantly that would give the group more room to ease production later this year. OPEC+ seems determined to be reactive rather than proactive. The cartel doesn’t feel strong enough to attempt to move the market.
- OIL PRICES IN FOCUS: US LAUNCHES ATTACK ON VENEZUELA, IRAN WATCHED
On January 3rd U.S. forces launched an operation in Venezuela, and captured President Nicolas Maduro. Given that Venezuela has among the largest oil reserves in the world, the headlines immediately caught the market’s attention. The immediate market reaction on Monday’s open saw oil prices fall before rising higher. The uncertain but volatile reaction of the markets is unsurprising, considering that both Venezuela and the United States want to increase oil output. The fact that the US operation was limited and did not endanger the oil supply any more than it had already been affected by halting the passage of oil tankers in the area in recent weeks also left markets uncertain. Oil producer Iran has seen widespread protests in recent days, which threaten to destabilise the regime. The country is currently under oil sanctions, and in the short term instability could threaten oil supplies. In the longer term, a potential new government could see sanctions lifted, increasing the supply of oil.
Conclusion – What can be expected this year
The current view is that oil markets will remain somewhat oversupplied, although this is subject to change. In the short term, it seems unlikely that oil will trend strongly in one direction, although geopolitical shocks may cause unsustained, dramatic spikes. However, if the global economy outperforms expectations, and for example, if trade concerns are put to one side, we might see a move higher. But signs of trade conflict and economic decline may cause oil price stagnation.