Afshin Javan said that in the years leading up to 2026, oil markets have become less sensitive to geopolitical tensions than in the past. Reviewing price volatility charts since 2020, he said the sharp turbulence that year — largely caused by the COVID-19 pandemic — was unmatched by later events, including Middle East developments and the Russia-Ukraine war.

“Even major geopolitical tensions in recent years failed to generate sustained and severe volatility in the oil market,” Javan said, adding that market reactions since 2022 have been limited and short-lived. He noted that the role of derivatives traders and speculators in amplifying price swings has also declined significantly.

U.S. Shale Growth and Oversupply Risks

Javan said oil markets were once heavily influenced by nonfundamental shocks driven by fear and uncertainty, but pricing dynamics have since undergone a clear shift.

“Today, the market pays far more attention to physical supply-demand balances,” he said.

Production volumes, storage levels, spare capacity among OPEC and OPEC+ members, and real demand conditions now play a more decisive role in market behavior, he said, contributing to greater stability as a result of recent policy decisions.

Addressing the impact of rising U.S. shale output, Javan said shale production could pose challenges for producers but would not necessarily lead on its own to a sharp increase in oversupply.

He said OPEC and OPEC+ policies — particularly the gradual return of part of voluntary production cuts — combined with non-OPEC supply could raise the risk of excess supply. However, demand trends and the market’s capacity to absorb additional barrels must also be taken into account.

China, Asia Help Support Global Demand

Javan said Asian economies, particularly China, continue to play a key role in supporting global oil demand despite signs of economic weakness.

“Even with these challenges, Asian economies can still absorb a significant portion of global supply,” he said, helping OPEC+ succeed in managing the market.

He said the current market balance differs fundamentally from previous cycles, with prices holding in a narrower and more stable range of about $60 to $62 a barrel — a level he said is unlikely to change meaningfully in the short term or even in the first half of next year.

Falling Upstream Investment a Major Risk

Javan warned that energy security will remain under pressure and risk in the short term but will become an unavoidable priority for all oil and energy market players in the medium term.

“In the long run, energy security will move toward balance, and policies must ensure sustainable supply,” he said.

He described declining upstream investment as one of the most serious threats facing the energy market, stressing that continuous investment is needed even to maintain current demand levels.

Javan said OPEC’s proposed maximum production capacity mechanism could help encourage investment among member states. However, he noted that countries such as Iran, Russia and Venezuela are unable to fully benefit from the mechanism due to sanctions.

Energy Transition Moves Toward Pragmatism

Javan said major oil companies have largely moved away from the radical energy transition approaches promoted several years ago, replacing them with more pragmatic strategies.

“The idea of completely eliminating fossil fuels and rapidly replacing them with renewables is unrealistic, even surreal,” he said.

A balanced energy mix, combined with technological advances such as carbon capture, offers a more practical path toward long-term energy security, he added.

Oil Market Scenarios for the Year Ahead

Javan said forecasting the oil market remains complex and should be approached through multiple scenarios — from an optimistic outlook with no major disruptions and flexible production management to pessimistic scenarios involving geopolitical shocks or sustained physical supply disruptions.

“The worst-case scenario would be a physical shock along major production routes,” he said, warning it could have wide-ranging effects on the global economy.

He said cooperation among producers since 2017 has played a critical role in managing the market, and decisions grounded in real market conditions can continue to reduce volatility and preserve balance.