Contrary to popular belief, oil prices are not determined by a single country, company, or even one cartel. They are the outcome of a global tug-of-war between producers, traders, and policymakers — a market governed by both physics and human psychology, where the actions of a few major players can send ripples across the world within hours.
On November 2, OPEC+ announced a modest production increase of 137,000 barrels per day for December, while freezing any additional hikes through the first quarter of 2026 — a move that surprised many analysts who had expected continued caution.
At first glance, boosting output at a time when prices are under pressure seems counterintuitive. But this decision is less about short-term prices and more about market share and influence.
As Morningstar aptly put it: “Defending market share has now become more important than defending prices.”
This marks a familiar strategic shift among major producers. The world has seen this playbook before — in 2014 and 2020 — when Saudi Arabia and Russia opened the taps to push out high-cost competitors, particularly US shale producers.
Those rounds triggered sharp price declines, but OPEC+ aimed to reassert dominance over a market increasingly shaped by rising American output. While the 2014 campaign partly backfired (see: “OPEC’s Trillion-Dollar Mistake”), it succeeded in forcing many over-leveraged shale producers out of business.
The strategic logic behind a price war
At first, it may seem irrational for OPEC+ to drive prices down deliberately. Yet history shows that short-term pain can yield long-term control.
By enduring a period of lower prices, the cartel can squeeze out marginal producers with higher costs. Once those players retreat, OPEC+ can tighten supplies again and regain its pricing power.
The latest increase comes as US crude output hits a record 13.7 million barrels per day — a striking comeback underscoring the resilience of America’s shale industry, whose producers can ramp up drilling quickly when prices rise and shut down just as fast when they fall.
This flexibility has made the United States the world’s de facto swing producer, but it comes at a cost. Unlike OPEC+, which coordinates through collective agreements, US producers act independently. When dozens of companies simultaneously boost drilling in response to higher prices, the result is oversupply.
In other words, the very efficiency that makes shale powerful also limits its long-term impact.
OPEC+ understands this dynamic well. By modestly raising output now, it is signaling that it won’t surrender market share to US producers easily — even if that means tolerating prices around $75 a barrel instead of the $90 preferred by many members.
Beyond barrels: the psychology of pricing
Physical supply alone doesn’t dictate prices; sentiment and expectations play an ever-greater role.
In oil markets, expectations move faster than production.
If traders foresee even a modest surplus — say, half a million barrels a day — prices begin adjusting before those barrels actually hit the market.
Futures markets integrate factors such as inventories and exchange rates, forming a complex web of feedback loops.
When economic data point to weaker global demand, traders price it in immediately. Conversely, an event like a refinery fire in California or tensions in the Strait of Hormuz can move prices overnight — even if global supply remains unchanged.
That’s why oil markets often appear detached from fundamentals: they reflect not just today’s balance of supply and demand, but the collective expectations of millions of participants about tomorrow.
The new reality: shale versus the cartel
Over the past decade, the rise of US shale has reshaped the global energy landscape.
Where OPEC once moved prices with a single statement, its influence is now constrained by a faster, more agile US industry.
Yet America is not immune to pressure.
Shale production relies heavily on financial discipline and investor confidence — both of which erode quickly if prices fall below $70 per barrel.
Here lies OPEC+’s advantage: it can withstand lower prices longer than many independent US producers.
If Brent stabilizes between $75 and $85, that’s a comfortable range for OPEC+ — high enough to protect margins for energy majors and low enough to discourage a flood of new shale drilling.
But if a genuine surplus forms, a slide below $60 cannot be ruled out — testing the resilience of producers and policymakers alike.
What it means for consumers and investors
For consumers, this price war translates into volatility at the pump.
Fuel prices typically fall with a lag after crude declines — and they rarely drop as quickly as they rise.
For investors, understanding these dynamics is crucial. Energy stocks are among the most volatile in the market, reacting more to expectations about future prices than to current spot levels.
In a world oscillating between economic uncertainty, OPEC+ maneuvers, and record US output, volatility remains the only constant.
The most successful investors are those who grasp the forces shaping this battlefield.
Oil remains as much a geopolitical currency as an economic commodity — and as long as the contest between OPEC+ and US producers endures, the market will remain what it has always been:
a high-stakes arena ruled by patience, power, and price.
