One of the big surprises of 2025 was OPEC+ abandoning efforts to raise the price of oil.
For years, OPEC has been a strong market backstop, managing supply to maintain crude oil levels. However, a combination of declining market share, inflexible non-OPEC production ultimately forced a change in strategy and perhaps prompting a sudden change in strategy from US President Trump.
This shift began in the spring of 2025, when Saudi Arabia and its allies signaled they were no longer willing to bear the burden of production cuts, while producers in the US, Guyana and Brazil continued to reach record production levels. By the middle of the year, the ‘price-over-volume’ mantra was replaced by a more aggressive pursuit of market share, reminiscent of the 2014 price war.
Internal tensions reached a fever pitch as several member states, notably Iraq and Kazakhstan, repeatedly produced more than their assigned quotas. Frustrated by the lack of discipline, the core leadership decided that a period of low prices would serve as a ‘reset’ to force adherence to future agreements.
OPEC might have wanted to punish US shale players (the source of all supply growth over the last decade) for their ‘drill, baby, drill’ mantra.
Today WTI crude fell $1.61 to $56.74. This ends Monday/Tuesday’s gains and keeps oil stable for the week, near five-year lows.
wti crude oil daily
As we head towards 2026, the question is no longer when OPEC+ will cut again, but rather how long they can endure the fiscal pain of sub-$70 oil in an attempt to re-dominate the global energy landscape. Ultimately, the cure for low prices is low prices. US shale producers have cut drilling budgets and will continue to do so. Some are making money below $60 WTI as costs have far exceeded crude oil prices since Covid.
I predict that buying crude oil will be one of the great trades of 2026 – just as it was in late 2020. The question is ‘when to buy?’ There is an argument that all excess oil has already been priced in and the global balance is not as bad as it seems. I would be sympathetic to that argument if we could get through the winter without the indiscriminate waste of oil. So I believe the trade will be to buy a puke in the oil market below $40 or wait until April when seasonal correction will start.
