What’s Going On With Oil?

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In recent months, many economists have predicted a recession on the horizon, and, as the strength of the oil market largely tracks the growth of the American and global economy, most oil analysts entered 2025 predicting slowing demand. The International Energy Agency (IEA) predicted in its oil market forecast that global oil demand would rise by only 2.5 million barrels per day from 2024 to 2030, with annual growth slowing year by year, which represented the consensus view.

But, despite tariff threats and uncertain markets, eight OPEC+ countries (the Organization of the Petroleum Exporting Countries: a permanent, intergovernmental organization to coordinate oil policies) announced in April that they would increase their oil production, releasing roughly half a million extra barrels per day in May. This was a reversal from the group’s 2023, post-COVID production cuts. They increased supply again in July, then again on Sunday, August 3.

On paper, this should have led to a dramatic increase in oil supply right as demand decreased, along with a collapsing oil price incoming. And perhaps that was the plan for OPEC, which exists to increase revenues for its member countries any way possible. Reducing the price of oil makes it hard for non-OPEC countries to compete on price. Halff told TMD that a 1997 output increase drove “a lot of non-OPEC production, including US production, out of the market for 10 years, and it took them years to come back.”

But the price didn’t collapse. Why?

The first explanation, according to Ken Medlock (senior director of the Center for Energy Studies at Rice University’s Baker Institute), is that OPEC saw demand that the forecasters didn’t, particularly in the global south. Developing countries have less capital to invest in new forms of energy, while also needing a lot of energy immediately. Plus, “oil is still a really easy commodity to move. It’s a liquid; you can put it in a barrel, you can put it in a bucket if you want to,” Medlock told TMD. “At some point it just becomes a numbers game. How do you actually meet economic growth targets in those countries with growing populations? Well, you’re going to have to produce a lot of everything. And that’s really what OPEC leans into in their outlook.”

OPEC’s World Oil Outlook 2025 was the outlier in oil forecasts, predicting consistent growth in the oil market, and it grounded its projections on that point about global demand. To note: Although most of OPEC’s increased output has come from Saudi Arabia and the Gulf States, none of TMD’s sources thought their increases were influenced by politics or attempts to curry favor with the Trump administration. Conversely, several suspected that the pessimistic forecasts from organizations like IEA may be influenced by support for transitioning to a renewable grid.

The second explanation for the oil is somewhat more ominous: China has been building up unprecedented oil reserves. “China has massively increased its storage capacity over the years—over the decades, really—but that increase has accelerated over the last year,” Halff told TMD. According to IEA and data from Kayrros, China has increased its crude inventories by an estimated 82 million barrels (equivalent of roughly five days of total U.S. oil consumption) during the second quarter of 2025. This was spurred by a new energy law in China enacted at the beginning of the year, which made the establishment of strategic reserves a legal obligation for both state-owned and private companies. China’s oil-hoarding either helped stabilize the price of oil in an uncertain market, or absorbed oversupply, preventing a price crash, depending on your viewpoint. It could also be preparation for an invasion of Taiwan or just part of China’s move toward greater energy security, seen also in its investments in coal.

Information about China’s stockpiles comes via satellite imagery, as “Chinese inventories are kind of a black box,” according to Medlock. But the use of satellites has made for a far more transparent and resistant oil market. This year, there have been tensions with China, war with Russia, and strikes on Iran, and yet none of these have particularly upset the oil price. “In the past, there was no transparency, so the market was panicking every time there was a disruption,” Halff said. The ability to track the world’s oil from space “has made the market much more resilient, much more nimble, much more able to quickly respond to a disruption in supply.” Even something as extreme as taking out Iran’s oil fields wouldn’t have a huge impact on oil prices, according to Medlock, as “there’s enough spare capacity on the global system to offset” their 1.5 million barrels a day.

Finally, there’s the question of the health of the American oil market, and President Donald Trump’s statements on this are somewhat contradictory. On one hand, Trump wants American companies to “Drill baby, drill!” but he also campaigned on bringing down oil prices for the American commuter. “Those things do not go together,” Medlock told TMD. “If the price is too low, then it’s not healthy enough to support a vibrant upstream oil sector because you can’t cover costs.”

Industry leaders told TMD that a “healthier”—higher—oil price, combined with the administration’s deregulation and easier permitting, could make for a good period for smaller, independent producers. However, the Permian Basin is changing, with large companies like Exxon and Chevron buying up more land and smaller firms, and these multinationals may benefit from a decreasing oil price, making for cheaper acquisitions. As Medlock noted, that too could be beneficial long-term for American oil, as new innovations could potentially increase the oil extractable from shale.

Regardless of their views on OPEC, the IEA, or the future of American oil, every source TMD spoke to said it was tough to predict what was going to happen with the oil market at this moment. Trump’s economic policy is defined by uncertainty, and nobody knows whether he will hold to his policies, and what those policies will do if he does. Trump on Wednesday announced higher tariffs on India for purchasing Russian oil, but is that a bargaining chip or a real policy? And will the U.S. impose tariffs on other countries that purchase Russian oil?

Whatever happens, oil isn’t going away anytime soon, and unless Paramount’s new owners cancel Landman, Tommy will have a job for a long time to come.

Worth Your Time

Less than 2 miles from the Florida line sits Folkston, Georgia, a rural city home to some 4,700 people and, soon, the country’s largest immigrant detention center. But the facility has been met with mixed reactions from Folkston locals, Guy Chazan reported for the Financial Times. “About 400 new jobs will be created with the expansion. ‘This is a job producer, so the people are excited about it,’ said Buddy Carter, a Congressman who represents this part of Georgia and played an instrumental role in landing the deal. … But others worry about the reputational hit Folkston is about to take. ‘I can’t accept the idea that the number one thing that will mark us out is having the biggest ICE detention centre in the country,’ said Antwon Nixon, a local pastor and activist,” Chazan wrote. “The move to expand the Folkston centre makes perfect sense to [Charlton County administrator Glenn] Hull. ‘You have a physical asset in your community and it would be irresponsible not to maximise it,’ he said. ‘You’re either growing or dying as a community.’ He is also hoping Charlton County’s role in the expansion could further loosen the Trump administration’s purse strings. ‘We’re providing a service to the federal government — maybe they could do something for us?’ he said.”

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In the Zeitgeist

The Toronto International Film Festival released its lineup of films on Tuesday. We were particularly excited to see Love+War, a documentary about Pulitzer Prize-winning combat photographer Lynsey Addario, make the list. 

Let Us Know

Did you watch Landman? If so, what did you think?