From a fundamentals perspective, oil prices should be lower. Supply is higher than demand, inventories are adequate, and by traditional measures the market ought to be under pressure. Yet prices continue to hold around the $60–65 range. The reason is not fundamentals, but geopolitics.
Geopolitical risk has been supporting oil prices for some time now, creating a disconnect between what supply-demand balances suggest and where prices actually trade. That tension, between perceived risk and physical reality, has persisted for years and shows little sign of disappearing. Uncertainty, rather than clarity, has become the defining feature of energy markets.
OPEC finds itself in an especially difficult position. With signs of oversupply, its only real option is to continue managing production restraint. But that strategy has limits. At current prices, restraint is manageable, yet it places ongoing strain on member countries that need higher revenues. Internal debates around quotas remain unresolved and continue to act as a source of friction within the group. OPEC is effectively stuck, trying to preserve unity while navigating an increasingly uncertain global backdrop.
Investment decisions reflect this uncertainty. Venezuela is a clear example. Recovering production there would require billions of dollars in capital and, more importantly, five to ten years of sustained political and economic stability. For major oil companies that have been burned before, that level of confidence is difficult to justify. Smaller independents may be willing to take on higher risk for potentially transformative returns, but large-scale investment will remain cautious.
For now, oil markets remain suspended between geopolitical risk and weak fundamentals, with uncertainty firmly priced in.