Oil markets should remain calm for now

Key highlights:

Crude realities: Geopolitical heat, but market remains cool

• Geopolitical escalations are typically bullish for oil, but the market has stayed calm. Spare capacity is available, OPEC+ is releasing barrels, and no major physical disruptions have taken place.
• Demand growth is weak, with China stockpiling barrels instead of consuming them. The questions now are how much more it can store and how long this pattern will continue.

Security of supply

• Energy security is increasingly about more than oil. Liquefied natural gas has become a frontline commodity with strategic importance.
• The strike on Qatar, the world’s second-largest LNG exporter, highlights vulnerabilities in global gas markets and raises fresh concerns about supply continuity.

Bullish forces in play

• Sanctions are tightening the market. Secondary sanctions on Russian buyers are restricting flows, while tougher measures on Iran are adding to the pressure.
• Trade tensions could intensify the situation. If the European Union imposes tariffs on China and India after U.S. pressure, the strain on global flows will increase.
• Even with OPEC+ adding barrels, supply growth faces limits. Russia is struggling with capacity ceilings, and some producers are already pumping at or above their sustainable levels.

Impact on investment

• Investment continues to follow oil price cycles. Higher prices encourage new projects, while lower prices slow down activity.
• Costs also tend to rise with prices. This link between costs and prices is a simple but often overlooked factor that shapes both investment decisions and project competitiveness.