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Oil Touched $123 as OPEC Fractures and Geopolitics Tightens Supply
Following the escalation of the Middle East conflict, shares of BP have moved from being among the weakest performers in the global energy sector to emerging as one of its clear leaders.
Oil prices have reached $123 today, marking their highest since 2022. Mr. Trump has indicated that pressure via blockade would continue, whilst Iran has suggested a potential move towards $140 in that case. The Strait of Hormuz remains effectively constrained, sustaining the risk premium.
Meanwhile, the United Arab Emirates has quit OPEC and OPEC+. Its exit, effective from 1 May, is expected to help accommodate rising demand, as the country intends to gradually increase production. Previously, it was ranked the third-largest producer within the oil cartel, although its output declined in March.
However, this development could deal a notable blow to the influence and positioning of Saudi Arabia, as it sends a clear signal of potential fragmentation within the organization. The response from Saudi Arabia will be particularly important to observe.
Summing up, the oil market is shifting from a purely price-driven rally to a structural and political inflection point. With Brent Crude currently near $120 ($116 at the moment of writing), tensions around the Strait of Hormuz sustain the risk premium, Meanwhile, with the United Arab Emirates step away from OPEC, the balance of power within the energy market is beginning to shift. This introduces not only higher volatility, but also the risk of fragmentation within supply coordination — meaning prices may increasingly be driven by geopolitics and strategic decisions rather than traditional fundamentals.Trade smart with Headway
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