THE PRICE OF MARKET SHARE

July 2025 marked a turning point for OPEC+. The alliance of oil-producing countries altered its strategy, pivoting from supply restrictions to actively ramping up production.

The decision to boost output amid subdued demand and rising inventories signals a shift in focus from price stabilization to reclaiming market share. This move has already drawn mixed reactions from markets and may trigger structural changes in the global oil balance in the second half of the year. The logical market fluctuations following the alliance’s decision were exacerbated by sharp statements from US President Donald Trump regarding the Russia-Ukraine conflict. On July 14, he threatened to impose "very severe" secondary tariffs—up to 100%—if no agreement is reached within 50 days. Following his remarks, Brent crude fell to $69.33 per barrel, while WTI dropped to $67.26. According to Trading Economics, market participants had anticipated more decisive measures, and the announced delay further pressured prices.

Naturally, these global market developments directly impact Azerbaijan, which participates in OPEC+ on a voluntary basis and typically supports the alliance’s decisions while strictly adhering to assigned quotas.

Faster than planned

On July 5, eight OPEC+ member states that had voluntarily cut production agreed during a videoconference to increase daily output by 548,000 barrels starting in August. This decision continues the upward trend initiated earlier this year. Since January 2024, these eight countries (Russia, Saudi Arabia, Iraq, the UAE, Kazakhstan, Algeria, Oman, and Kuwait) had voluntarily reduced collective output by 2.2 million barrels per day (bpd). However, from April 2025, these volumes began gradually returning to the market: a 138,000 bpd increase in April, followed by monthly rises of 411,000 bpd in May–July.

The production boost is progressing faster than initially planned, as the group aims to capitalize on strong summer demand and regain market share. This will allow OPEC+ to fully unwind its last production cuts a year ahead of schedule. The OPEC Secretariat in Vienna attributed the decision to "stable global economic prospects and current healthy market fundamentals, reflected in low oil inventories."

At its next meeting on August 3, the cartel is expected to consider adding roughly 548,000 bpd in September, finalizing the restoration of the 2.2 million bpd cuts announced in 2023. Analysts note that OPEC+ is clearly transitioning from a price-defense strategy to a market-share battle, though this risks oversupply and further price declines by year-end.

In its August production hike announcement, OPEC+ cited "resilient global economic prospects and sound market fundamentals," echoing recent communiqués affirming the oil market’s robust health. However, Reuters suggests the reality may be less rosy, given sluggish demand growth from key consumers. China’s crude imports, for instance, grew just 0.3% year-on-year in the first five months of 2025, averaging 11.1 million bpd.

"However, the pace is likely to accelerate with June data: LSEG Oil Research estimates imports of 11.96 million bpd for the month, up from customs figures of 11.30 million in June 2024. Stronger June imports lifted Asia-bound shipments in H1 2025 to 27.36 million bpd—620,000 higher than the same period last year," Reuters analysts noted. This aligns closely with OPEC’s regional demand growth forecasts. Its June monthly report projected non-OECD Asian demand to rise by 630,000 bpd.

Oil beyond politics

Further insights emerged at the 9th OPEC International Seminar in Vienna, attended by a high-profile Azerbaijani delegation. OPEC Secretary-General Haitham Al Ghais stated that anticipated sharp demand growth in Q3 and Q4 drove the "Group of Eight" to raise quotas: "We maintain strong demand expectations for this year—1.3 million bpd, driven by a healthy economy. This means robust demand growth, especially in Q3, with balanced markets continuing into Q4."

Al Ghais dismissed International Energy Agency (IEA) surplus predictions as overly pessimistic: "We’ve seen the IEA and so-called ‘experts’ forecast surpluses for Q1 and Q2. Now, with actual data, the numbers tell a different story—there is no oil surplus."

UAE Energy Minister Suhail Al Mazrouei emphasized OPEC+’s market acumen: "Our decisions prove the group understands the market better than others. We act based on its needs."

On geopolitics, Al Ghais stressed OPEC’s opposition to trade restrictions disrupting energy flows: "Any measures limiting production or trade distort supply-demand balance and help no one." He called sanctions on Iran, Venezuela (both OPEC members), and Russia "an unhealthy narrative" for producers and consumers alike, while noting OPEC cannot intervene in bilateral disputes.

Focus on investment and stability

Brent crude prices have lost approximately 20% of their value since mid-2023, dropping to $82.4 per barrel by the end of June. While prices fluctuated due to ongoing geopolitical uncertainty in the Middle East, they remained broadly stable. Additionally, the looming "nuclear talks" between the US and Iran continued to ease upward pressure on the market.

The importance of major alliances’ decisions—which influence market conditions and, consequently, prices—for Azerbaijan’s economy was reaffirmed by a study from ING Group, the Netherlands’ largest banking group. The report noted that every $1 increase in global oil prices adds roughly $350 million in annual export revenue to Azerbaijan. Earlier estimates had suggested each dollar per barrel translated to $300 million in export revenue and $150 million in annual budget inflows.

Against this backdrop, Azerbaijani representatives at the Vienna forum clearly outlined the country’s priorities in this new phase of global energy policy. Energy Minister Parviz Shahbazov highlighted key directions: investments in sustainable energy, Azerbaijan’s strategic role in ensuring Europe’s energy security, and the necessity of long-term commitments from consumers.

As the oil market grows increasingly volatile and geopolitical risks escalate, Baku is working to solidify its position as a stable and predictable partner. The decision to increase production within OPEC+ aligns seamlessly with Azerbaijan’s broader strategy to expand export routes and reinforce its reputation as a reliable supplier. Five hydrocarbon projects, developed in collaboration with international partners, are expected to boost oil and condensate production by 2030. Meanwhile, exploration continues for promising onshore and offshore reserves.

In his address, Shahbazov emphasized that despite projections showing oil and gas accounting for over 53% of the global energy mix until 2050, current restrictions on developing traditional energy resources could lead to future supply shortages: "Given that oil and gas remain central to our energy mix—a trend likely to persist—we cannot delay investments in this sector. Sustainable energy supply is impossible without investment. Cutting funding for energy projects now may result in supply disruptions and real risks down the line."

For his part, SOCAR President Rovshan Najaf reiterated Azerbaijan’s commitment to the energy transition, while stressing the need to account for national specificities. His meetings with executives from major global energy companies demonstrated that interest in regional projects remains strong despite global uncertainties. Discussions on potential joint initiatives confirmed that Azerbaijan continues to attract international investment in its energy sector.

Thus, OPEC+’s strategic shift and the growing recognition of Azerbaijan’s role in Europe’s energy balance are creating a new context in which the country can amplify its influence on the global stage.