Current oil prices have merely returned to levels seen before the onset of U.S.-China trade tensions in early April, so it doesn’t signal a new bull run. President Trump’s trade policy is still unpredictable and theatrical, and while much of the market has adapted to this erratic environment, such political uncertainty remains a headwind for broader economic sentiment and, by extension, oil demand. Simultaneously, U.S. shale production is robust and hedged out six to twelve months - meaning more oil is already on the way. With global demand growth projected at just over 1 million b/d this year, we could see a potential replay of the 2015–2016 market-share battle, which saw prices plunge. The shale sector today is in a much stronger financial position. Major players like ExxonMobil are now leading production efforts and claim they can remain profitable even at $50 per barrel. Plus, many smaller producers are insulated for the short term by favorable hedging contracts. So, any upside for oil prices is limited.
Oversupply and the Illusion of Compliance
There’s concern over the reliability of production data and quota compliance within OPEC+. Cheating has long been part of the organization’s dynamic, with member states like Iraq and the UAE frequently exceeding their agreed-upon limits. Within the analyst community, it's understood that overproduction has been occurring for some time, well before recent increases were officially acknowledged.
Don’t Declare Peak Demand Just Yet
Arguments for peak oil demand often focus solely on mobility data and so are not realistic. Foundational sectors like aviation and petrochemicals remain significant consumers of oil. Oil demand dynamics are multi-faceted, and while some countries may plateau, others, like India, are ramping up imports. However, India alone cannot offset the flatlining or declining demand elsewhere, weakening the case for sustained price momentum.