Sanctions and OPEC+ shortfalls are squeezing oil supply. The much-touted glut is a mirage and higher prices are the real risk ahead
Forget the talk of an oil glut. The reality is that sanctions on Russia, Ukrainian strikes on Russian refineries, and OPEC+ production shortfalls are cutting into supply.
Russia remains one of the world’s largest oil and gas suppliers, and its exports have long been critical to balancing global demand. But those flows are now under strain. Washington has escalated pressure on Turkey, India and Europe to curb purchases. Data shows the volume of Russian gas reaching Europe through Turkey rose by more than 26 per cent earlier this year—a trend U.S. officials want reversed.
U.S. President Donald Trump has taken a particularly hard line. In a meeting with Turkish President Recep Tayyip Erdogan last week, he urged Ankara to cut its Russian imports. At the United Nations General Assembly, Trump accused the European Union of financing Moscow’s war effort: “They have to immediately cease all energy purchases from Russia,” he said. “Otherwise, we are all wasting a lot of time.” As veteran business journalist Stanley Reed recently wrote in the New York Times, Europe has sharply reduced its dependency on Russian energy but has been reluctant to sever the flows completely.
India is also in Washington’s sights. The U.S. has tied the prospect of lowering tariffs on Indian goods to reductions in New Delhi’s purchases of Russian crude. Sources told Reuters that Washington views this as a condition for unlocking a broader trade agreement.
Ukraine, meanwhile, is striking at Russia’s energy infrastructure directly. Long-range drones have hit refineries and pumping stations, including one in Chuvashia that caught fire and halted operations.
By hitting Russia’s fuel network, Kyiv hopes to choke off a key source of war funding. The attacks have already forced Moscow to introduce a partial ban on diesel exports until the end of the year and extend an existing gasoline export ban. Russian Deputy Prime Minister Alexander Novak acknowledged that the outages have left parts of Russia short of key fuel grades.
Geopolitical risks add further strain. NATO has warned Moscow of a response to any more violations of alliance members’ airspace, raising the likelihood of additional sanctions on Russia’s oil industry. As ANZ Bank senior commodity strategist Daniel Hynes told reporters, the tensions are ratcheting up pressure on Moscow’s exports.
Yet OPEC+, which brings together the Organization of the Petroleum Exporting Countries and allies such as Russia, is in no position to fill the gap. Despite announcing output hikes in recent months, the group has delivered only about three-quarters of the promised volumes.
Analysts say performance could slip further as members hit capacity limits. OPEC+ has been pumping almost 500,000 barrels per day below target: a shortfall equal to 0.5 per cent of global demand.
Two factors explain the gap. First, countries such as Kazakhstan and Iraq have been ordered to make “compensation cuts” for previously exceeding their quotas, which lowers overall output. Second, years of low investment mean producers have little spare capacity left. Most member states simply cannot pump more. Barclays now predicts OPEC spare capacity will fall to just two million barrels per day by September 2026.
For Canada, the implications cut both ways. A tighter global market supports prices for Canada’s oilpatch, helping government revenues and jobs. But it also risks higher fuel costs for households across the country. With inflation still weighing on Canadians, any renewed surge in energy prices could ripple through the broader economy.
Taken together, U.S. diplomatic pressure, Ukrainian strikes, Russian export bans, NATO threats and OPEC+ underperformance are tightening supplies and supporting prices.
The conclusion is clear: global oil markets are not oversupplied. If anything, the real danger is undersupply.
The much-touted glut is a mirage, and the pressure on prices is only likely to intensify in the months ahead.
Toronto-based Rashid Husain Syed is a highly regarded analyst specializing in energy and politics, particularly in the Middle East. In addition to his contributions to local and international newspapers, Rashid frequently lends his expertise as a speaker at global conferences. Organizations such as the Department of Energy in Washington and the International Energy Agency in Paris have sought his insights on global energy matters.
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