Amid shifting geopolitical landscapes and complex global economic conditions, oil continues to be one of the most closely watched and volatile commodities. From OPEC+ decisions to the ripple effects of regional conflicts, the energy market is navigating a highly dynamic environment with implications that extend far beyond price charts.
George Khoury, Global Head of Research and Education at CFI, breaks down the key drivers behind recent oil price movements, the broader economic impact of sustained price shifts, and what investors should watch for ahead of the next OPEC+ meeting. If you’re covering energy markets or related developments, we’re happy to provide further commentary or insights.
” When it comes to oil prices, several key factors must be closely monitored. These include decisions made by OPEC, developments in global geopolitics, and shifts in economic cycles—whether recovery, slowdown, or the risk of recession. Each of these elements directly influences the trajectory of oil and energy prices.
Geopolitical developments, in particular, can have a pronounced impact. Earlier this week, oil prices rose despite an increase in supply, following a notable escalation in tensions between Russia and Ukraine. The event was among the more significant confrontations seen recently, raising concerns about potential further instability in the region. Although peace talks have been ongoing for months, they appear to have produced limited progress thus far.
Russia, as a major global producer of oil and gas and a key OPEC+ member, plays a pivotal role. Any disruptions to its production or export infrastructure can quickly affect global supply—an effect already observed in recent price movements.
Additionally, the increasing likelihood of tighter or expanded sanctions on Iran by the U.S.—and potentially Europe—could further constrain production and transportation, contributing to upward pressure on prices.
Implications of Sustained Low Oil Prices
The implications of persistently low oil prices must be viewed from two perspectives.
From the standpoint of oil-producing countries and companies, lower prices directly impact revenues. Each nation has a breakeven range for oil production—countries like Saudi Arabia typically operate within a range of $15 to $25 per barrel, although this varies, for example with their vision of 2030 the breakeven might be even higher more towards a range between $80–$85 per barrel. A sustained drop below these thresholds could significantly affect both national and corporate income.
From a global macroeconomic perspective, however, lower energy prices can be beneficial. They contribute to reduced inflation and support disinflationary trends, which is especially relevant as many economies continue to grapple with elevated inflation levels—including the U.S., Europe, Canada, Australia, and parts of the Middle East.
While some countries are nearing the targeted 2% inflation rate, others are still lagging. Lower oil prices aid efforts to bring inflation closer to desired levels—something the U.S. administration has been actively working toward, with recent signs of progress.
Energy Equities Outlook
Energy equities have demonstrated strong resilience over the past four to five years. Even during the COVID-19 pandemic and amid geopolitical uncertainty—particularly due to sanctions related to the Russia-Ukraine conflict—energy stocks have held firm.
European markets were especially affected, given their historical dependence on Russian energy imports. Still, many energy companies have continued to deliver consistent earnings and, in many cases, maintained their dividend payouts.
That said, the current environment remains highly uncertain—politically, economically, and geopolitically. Rising debt levels and looming recession concerns are likely to fuel continued volatility in the energy markets. While energy equities remain attractive, investors should be prepared for ongoing fluctuations in the near term.
Possibility of a Commodity Supercycle
We may be in the early stages of a new commodity supercycle. The current backdrop—marked by political, geopolitical, and financial uncertainty—does not favor energy market stability.
If global markets begin to contract or move toward recession, energy demand may weaken. In such scenarios, companies often draw on existing inventories rather than placing new orders, which can lead to downward pressure on prices.
While oil has recently seen upward movement, it remains unclear whether this trend is sustainable. Given the level of uncertainty, a more cautious or even bearish energy outlook could emerge in the near term.
Monitoring Ahead of the OPEC+ Meeting
As we approach the upcoming OPEC+ meeting, it’s important for traders and analysts to look beyond the event itself. Weekly crude oil inventory reports remain key drivers of short-term price movements and often present actionable trading opportunities.
However, today’s oil market is shaped by more than just traditional technical and fundamental indicators. External developments—including international policy decisions and unexpected geopolitical events—are playing an increasingly important role in shaping price action.
Two key developments to watch in the near term:
- U.S. trade and tariff decisions, which could directly impact global oil markets and influence OPEC+ strategy.
- The positioning and tone of the OPEC+ bloc. Historically, the group has avoided highly aggressive production changes. Given the recent increase in supply, further hikes appear unlikely in the short term”.