Oil market moves away from fear-based pricing; fundamentals confirmed

According to Energy Press, on the eve of entering 2026, Afshin Javan, in a general assessment of oil market developments, referring to price fluctuation graphs from 2020 until now, said: After the severe market turbulence in 2020, which was mainly caused by the Covid-19 pandemic, even the important geopolitical tensions of recent years, such as the developments in the Middle East and the war between Ukraine and Russia, could not cause severe and stable fluctuations in the oil market.
He added: Unlike the years before 2022, the reaction of the oil market to geopolitical tensions in the recent period has been very limited and short-term, and even the role of derivatives market players and speculators has significantly decreased in the escalation of fluctuations.
The growth of American shale production and the challenge of oversupply
The former representative of Iran in the OPEC executive board stated that the oil market was heavily affected by non-fundamental shocks caused by fear and uncertainty in the past and stated: Today we are witnessing a paradigm shift in oil pricing, in such a way that the market pays more attention to the physical balance of supply and demand than in the past.
Javan emphasized: Factors such as the amount of production, the level of reserves, the excess capacity of the OPEC and OPEC Plus member countries, and the actual demand situation now play a more decisive role in the behavior of the market, and this issue has caused the recent policies to have a positive effect on the stability of the market.
In response to a question about the impact of the growth of American shale oil production on the world market, he said: American shale oil production can create challenges for producers, but it alone will not necessarily lead to a sharp increase in oversupply.
According to the former representative of Iran in the OPEC executive board, OPEC and OPEC Plus policies, especially the gradual return of part of the voluntary production reductions, along with non-OPEC supplies, can increase the possibility of excess supply, but at the same time, the demand side and the market’s ability to absorb this supply should also be considered.
The role of China and Asia in maintaining global demand
Javan said about the role of Asian economies, especially China, in maintaining global oil demand: Although there are weaknesses in the economies of Asian countries, especially China, these countries can still cover a significant part of the market demand and absorb the supplied oil.
He added: This issue can help the success of OPEC Plus policies in managing the market, while the current market balance is fundamentally different from the past periods and the price range is at a much more balanced level, around 60 to 62 dollars; A level that is unlikely to change significantly in the short term or even in the first half of next year.