With major global economic ramifications, a new oil conflict is emerging through production and pricing strategies rather than military conflict

A fresh oil conflict is emerging via production and pricing tactics instead of military confrontation, with significant international economic consequences.

Context

OPEC+ has recently made the decision to raise crude oil production by 411,000 barrels per day (bpd) starting in June 2025.

This signifies the third straight month of rising production, partially offsetting the 2.2 million bpd voluntary reductions implemented in 2023.

This action led to a steep decline in Brent crude prices, reflecting a very reactive oil market.

Actions implemented by Saudi Arabia

In 2024, Saudi Arabia made a notable cut to its crude production, lowering it to under 9 million bpd, the lowest level since 2011, in a bid to bolster declining oil prices.

Owing to non-adherence from nations such as Iraq, Kazakhstan, UAE, and Nigeria, it now aims to challenge overproducers by saturating the market, a tactic employed in previous oil conflicts.

Cause for policy change

Post-COVID Demand Weakness: Following COVID, the economic recovery was “K-shaped,” meaning it was inconsistent and delicate, resulting in oil demand not rebounding robustly.

Emergence of Non-OPEC+ Producers: Nations such as Brazil and Guyana, together with U.S. shale oil companies, rapidly increased output to gain market share, contributing to the worldwide oversupply.

Causes of the Decline in Oil Prices

Oversupplied Market: Despite stagnant demand, numerous producers are increasing supply, exerting downward pressure on prices.

Peak Oil Demand Theory: The International Energy Agency (IEA) forecasts that worldwide oil demand could level off or potentially decrease by the decade's end, diminishing long-term price outlooks.

Energy Transition: The worldwide movement toward electric vehicles and renewable energy, particularly in key markets such as China and Europe, decreases dependence on fossil fuels.