Geopolitical Volatility and Oil Market Stability: Why $60/barrel Is the New Benchmark

The global oil market in 2025 has defied conventional wisdom. Despite a litany of geopolitical shocks-including the Saudi-UAE dispute over Yemen, U.S. sanctions on Venezuela, and the Israel-Iran conflict-Brent crude has settled into a new equilibrium around $60 per barrel. This price point, far below the $80+ levels seen in 2022, reflects a structural shift in how markets price risk. Geopolitical volatility, once a catalyst for sharp price spikes, is now absorbed within a framework of managed supply and demand dynamics. OPEC+'s strategic recalibration, global supply gluts, and the rise of heavy crude differentials have collectively capped prices, creating a landscape where defensive energy investments-particularly in OPEC-aligned producers and refiners-offer compelling opportunities.

OPEC+'s Calculated Stability

OPEC+ has emerged as the linchpin of oil market stability in 2025. After a 2.9 million barrels per day (b/d) production increase in 2023, the group has adopted a measured normalization strategy, unwinding voluntary cuts while aligning supply with observable demand growth. By October 2025, OPEC+ implemented a 137,000 b/d production adjustment to address concerns over an impending supply glut. This flexibility has allowed the cartel to maintain market predictability even as internal tensions flared. For instance, despite the Saudi-UAE dispute and Venezuela's production surges, OPEC+ held output steady through 2026, prioritizing long-term stability over short-term gains.

The introduction of a new framework for measuring maximum sustainable production capacity (MSC) in 2027 further underscores OPEC+'s institutional maturity. By shifting from arbitrary quotas to data-driven capacity assessments, the group aims to preemptively address imbalances, reducing the likelihood of price collapses like the 2014-2016 crisis. This approach has curtailed the influence of geopolitical premiums, as markets now price in OPEC+'s ability to counteract shocks through coordinated action.

Supply Gluts and the New Normal

Global oil markets in 2025 are defined by a persistent surplus. The International Energy Agency (IEA) forecasts a 3.8 million b/d surplus in 2026, driven by surging non-OPEC production from the U.S., Canada, and Brazil. While OPEC+ production increases have added to this glut, demand growth remains subdued, with the IEA projecting only 830,000 b/d of demand growth in 2025 and 860,000 b/d in 2026. This imbalance has pushed Brent crude below $60/b in 2025, with prices expected to remain anchored until 2026.

The oversupply has also reshaped crude differentials. Heavy crude, once a premium product, now trades at discounts due to oversaturation. However, this has created opportunities for refiners equipped to process heavy feedstocks. The U.S. Gulf Coast, for example, has seen refining margins surge to 3-year highs, driven by low crude prices and tight product markets. European diesel cracks have similarly hit record levels, with regional refinery closures and strong demand exacerbating shortages.

Refiners: The Hidden Winners

The 2025 market environment has been a boon for refiners, particularly those integrated with petrochemical complexes. Gulf Coast refiners like Valero, PBF Energy, and Marathon Petroleum have capitalized on low crude prices and high refining margins. Marathon's Chief Commercial Officer, Rick Hessling, noted that heavy crude differentials are expected to widen in Q4 2025 as Canadian and Middle Eastern production rebounds. PBF Energy's CEO, Matthew Lucey, anticipates a return of 2–2.5 million b/d of heavy crude by fall 2025, further bolstering margins.

State-owned OPEC-aligned refiners in China and the Gulf have also benefited. These entities maintain high throughput to meet domestic demand and export refined products like diesel and jet fuel, leveraging their scale to navigate volatile feedstock markets. Meanwhile, integrated producers like Saudi Aramco and PDVSA have capitalized on heavy crude differentials, using their production flexibility to offset lower Brent prices.

A Defensive Portfolio for 2026

Given the structural dynamics of 2025, a defensive energy portfolio should prioritize OPEC-aligned producers and refiners with exposure to heavy crude differentials. Key names include:- Saudi Aramco: Positioned to benefit from OPEC+'s MSC framework and its ability to adjust production in line with demand.- PetroChina and PDVSA: State-owned refiners with access to discounted heavy crude and strong export capabilities.- Valero and PBF Energy: U.S. refiners with Gulf Coast infrastructure optimized for heavy crude processing.

These entities are insulated from the price volatility that once characterized oil markets. OPEC+'s managed stability ensures that geopolitical shocks-such as U.S. sanctions on Venezuela or Middle East tensions-are absorbed within a broader framework of supply discipline. Meanwhile, the global surplus has created a floor for refining margins, ensuring steady returns for operators with low-cost processing capabilities.

Conclusion

The $60/barrel benchmark reflects a new era in oil markets, where geopolitical volatility is priced in but not amplified. OPEC+'s institutional resilience, global supply gluts, and the rise of heavy crude differentials have created a landscape where defensive investments thrive. For investors, the path forward lies in aligning with producers and refiners that can navigate this equilibrium-leveraging OPEC+'s stability while capitalizing on the margin expansion in refining.