Oil Markets Enter May on the Back Foot: Navigating Volatility Amid Geopolitical Crosswinds

The oil market’s uneasy posture heading into May 2025 reflects a perfect storm of geopolitical tension, divergent producer priorities, and demand fragility. OPEC+’s abrupt rescheduling of its May 2025 meeting—from May 5 to May 3—signals an industry under pressure to stabilize prices amid unprecedented uncertainty. This haste underscores the fragility of the market’s equilibrium, as traders brace for decisions that could redefine the trajectory of oil prices for years to come.

The OPEC+ Crossroads: Balancing Politics and Economics

The cartel’s May meeting is pivotal. Analysts widely expect a production hike of 300,000–750,000 barrels per day (b/d) to counter rising prices and seasonal demand. However, execution remains fraught. Overproduction by members like Iraq (exceeding quotas by 220,000–270,000 b/d) and infrastructure bottlenecks in Nigeria threaten compliance. Meanwhile, the UAE and Kuwait are expanding capacity to 4.2 million and 3.2 million b/d, respectively, while Russia aims to stabilize output at 11 million b/d. These moves aim to counter U.S. shale’s agility, which can pivot production within 4–6 months—a stark contrast to OPEC+’s slower, consensus-driven adjustments.

Geopolitical Tensions: A Double-Edged Sword

Trade wars are exacting a toll. U.S. tariffs on non-oil imports and China’s retaliatory measures have depressed oil prices to $60–65/bbl in early 2025, slicing global demand growth forecasts by 300 kb/d since March. The U.S.-Saudi relationship remains strained, with Washington demanding higher output while offering security guarantees—a transactional dynamic that risks destabilizing Middle East alliances. Meanwhile, Russia’s entrenched position within OPEC+ shields it from Western sanctions, complicating geopolitical leverage.

Adding to the chaos is the rise of new producers. Guyana, Brazil, and Canada are set to add 10.6 million b/d by 2025, threatening OPEC+ dominance. U.S. shale, too, looms large: its output could surge to 13.3 million b/d, further eroding the cartel’s pricing power.

Demand Outlook: A Fragile Recovery

The International Energy Agency (IEA) has slashed 2025 demand growth to 730 kb/d, with 2026 forecasts at 690 kb/d. EV adoption—projected to hit 35% of global vehicle sales by 2030—and macroeconomic headwinds are curtailing long-term prospects. Even the summer driving season, which typically boosts gasoline demand by 7–10%, may fail to ignite prices as traders anticipate oversupply.

Price Projections: A Delicate Tightrope

The meeting’s outcome will determine immediate price movements:
- A 500+ kb/d hike could drop Brent by 4–7%, easing gasoline prices by $0.10–0.15/gallon.
- A modest 100–300 kb/d increase (most likely) might only trim prices by 1–2%, with volatility persisting due to automated trading algorithms.
- No change or cuts (unlikely) could spike prices 2–9%, but analysts assign <5% probability to such scenarios.

Longer term, oversupply risks and non-OPEC+ growth could push Brent to $61/bbl by 2026—a 24% drop from early 2025 levels.

Key Risks: The Wild Cards

• Trade Policy Volatility: U.S.-China tariff negotiations could further suppress demand.
• OPEC+ Cohesion: Fiscal breakeven prices diverge sharply—Russia’s $62/bbl versus Nigeria’s >$100/bbl—risking internal fractures.
• Sanctions Dynamics: Iran and Venezuela remain constrained, but any sudden supply releases could flood the market.

Conclusion: Positioning for a Lower-For-Longetr Oil Era

Investors must prepare for a prolonged period of price declines and structural shifts. The data is clear: oversupply risks, EV adoption, and geopolitical fragmentation will define the next decade. Short-term traders should monitor the May 3 OPEC+ meeting closely, favoring bearish positions if a significant hike materializes. Long-term investors, however, should pivot toward energy transition plays—renewables, EV infrastructure, and efficiency technologies—while hedging against geopolitical flare-ups.

With global oil demand peaking as early as the mid-2030s, the era of $80/bbl crude may be a relic. The market’s “back foot” stance in May is no accident—it’s a harbinger of a new, more precarious reality.