Six months after the outbreak of the Middle East conflict, the dominant force in the global oil market is undergoing a structural transition: OPEC+, which has long relied on supply adjustments to influence prices, is witnessing a simultaneous contraction in both its market share and policy effectiveness.

Based on calculations using data from the International Energy Agency (IEA), OPEC+'s share of global oil production fell to approximately 40% in July. This is down from more than 48% before the Middle East conflict escalated in late February, with roughly four to five percentage points of that decline stemming from the UAE's exit from OPEC in May.

The combination of a shrinking supply-side share and contracting demand is making it increasingly difficult for OPEC+'s production decisions to sway oil prices. Since March, the group has announced six production increases, most of which have remained largely on paper. This shift from a "supply-led" to a "demand-led" market is fundamentally redefining the pricing dynamics of the crude oil market.

Demand Side: Weakness Emerges as the New Ceiling for Oil Prices

According to reports, the significant weakening of global oil demand has become one of the key factors in rebalancing the market by 2026. Amid severe supply disruptions, the contraction on the demand side has effectively offset a portion of the supply gap, thereby capping the upside potential for oil prices.

Behind this trend are both cyclical factors, such as fuel export restrictions and refinery output cuts, and structural influences, including the rising penetration of electric mobility. Slower demand growth implies that even large-scale supply disruptions may not necessarily lead to a sustained supply deficit in the market.

Market observers note that the demand side is increasingly acquiring the "swing" attributes once held by OPEC+. When the supply side struggles to quickly adjust the market through production increases or cuts, changes in demand themselves become a critical variable influencing the global supply-demand balance.

Supply Side: Share Falls to 40%, OPEC+ Production Hikes Struggle to Materialize

Data on the supply side also indicates that OPEC+'s market control is waning.

Based on IEA data, OPEC+ production in July accounted for only about 40% of global oil supply, significantly lower than the over 48% level seen before the conflict. In addition to the share change caused by the UAE's exit from OPEC, the continued production increases from non-OPEC producers, such as those in North America, have further diluted OPEC+'s share of global supply.

More critically, nominal production capacity does not equate to actual available supply. While key OPEC+ producers, including Saudi Arabia and Russia, still possess strong capacity to increase output, the disruption of the Strait of Hormuz as a vital export route means that some crude, even if produced, cannot easily reach international markets.

Consequently, the six production increases announced by OPEC+'s core group since March have, to a large extent, remained at the policy level, with limited impact on actual market supply. It was only during the brief US-Iran truce in July, when markets bet on the reopening of the Strait of Hormuz, that oil prices showed a more noticeable reaction to the prospect of higher production.

Historical Contrast: From "Swing Producer" to Two-Sided Supply-Demand Game

This development stands in stark contrast to the oil market of 2019. Back then, traders closely monitored OPEC+'s production decisions, with the market's focus being on whether the group would increase or cut output, and by how much.

Today, the market's attention is instead directed at how much crude can actually be produced and exported amid the Middle East conflict. As OPEC+'s supply share declines and its production hike policies fail to fully translate into real supply, the influence of demand-side changes on oil prices is rising. The pricing logic of the global oil market is shifting from being "supply-dominated" to a dynamic shaped by both supply and demand forces.

OPEC+ has responded by stating that its production decisions are aimed at supporting market stability and are not targeted at any specific price level. Looking ahead, oil prices will continue to hinge on the progress of restoring navigation through the Strait of Hormuz, as well as whether OPEC+'s production increase plans can truly be implemented.