OPEC+ production share falls to 40%, marking a structural shift in oil market dominance.
Six months after the outbreak of the Middle East conflict, the dominant forces in the global oil market are undergoing a structural shift: OPEC+, which has long relied on supply to regulate oil prices, is seeing its market share and policy effectiveness shrink in tandem.
According to Reuters calculations based on data from the International Energy Agency (IEA), OPEC+'s share of global oil production fell to about 40% in July, down from more than 48% before the Middle East conflict at the end of February; of this decline, about four to five percentage points came from the UAE's withdrawal from OPEC in May.
Shrinking supply and contracting demand have made it increasingly difficult for OPEC+ to influence oil prices – most of its six announced production increases since March have remained on paper . This shift from "supply-driven" to "demand-driven" is changing the pricing power of the crude oil market.
On the demand side: Contracting demand has become the new "ceiling" for oil prices.
According to Reuters, the sharp decline in global oil demand has become one of the key factors in the oil market's efforts to achieve a new supply-demand balance in 2026. With supply severely disrupted, the contraction in demand has effectively offset some of the supply gap, thus limiting the upside potential for oil prices.
Behind this change are both cyclical factors such as fuel export restrictions and refinery production cuts, as well as structural impacts from the increasing penetration of electric transportation. Slower demand growth means that even with large-scale disruptions on the supply side, the market may not necessarily experience a sustained supply shortage.
Reuters, citing market analysts, reported that the demand side is acquiring a "swing" characteristic that was previously associated with OPEC+ – when the supply side struggles to quickly adjust the market through production increases or decreases, changes in demand itself become a significant variable affecting the global supply-demand balance.
Supply side: Market share drops to 40%, OPEC+ production increase difficult to implement.
Supply-side data also shows that OPEC+'s market control is weakening.
According to Reuters calculations based on IEA data, OPEC+ production accounted for only about 40% of global oil supply in July, significantly lower than the pre-conflict level of over 48%. In addition to the change in share resulting from the UAE's withdrawal from OPEC, continued production increases from non-OPEC oil-producing countries such as North America have further diluted OPEC+'s share of global supply.
More importantly, nominal production capacity does not equal actual supply. Although major OPEC+ oil-producing countries, with Saudi Arabia and Russia at their core, still have strong production capacity, the obstruction of the Strait of Hormuz, a key export route, means that even if some crude oil can be produced, it will be difficult to enter the international market smoothly.
Therefore, the six production increases announced by the OPEC+ core group since March have largely remained at the policy level, with limited impact on actual market supply. Only during the brief ceasefire between the US and Iran in July, when the market bet on the reopening of the Strait of Hormuz, did oil prices show a more significant reaction to the production increase expectations.
Historical Comparison: From "Swing Producers" to a Two-Way Game of Supply and Demand
This shift contrasts sharply with the oil market in 2019, when traders closely watched OPEC+ production decisions, focusing on whether production would increase or decrease, and by how much.
Currently, the market's focus is on how much crude oil can actually be produced and exported amidst the Middle East conflict. As OPEC+ supply share declines and production increases become less likely to translate into actual supply, the impact of demand-side changes on oil prices is rising, and the pricing logic of the global oil market is shifting from "supply-driven" to a combination of supply and demand.
OPEC+ responded that its production decisions are aimed at supporting market stability and are not targeted at specific oil price levels. Future oil price movements will depend on the progress of the resumption of navigation in the Strait of Hormuz and whether the OPEC+ production increase plan can be truly implemented.
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