Seven major oil-producing nations — Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman — announced production adjustments on July 5, 2026, aiming to stabilize a market that has lurched from not enough oil to too much in just a few months.

How the Market Swung from Shortage to Surplus

Six months ago, nobody expected this. The International Energy Agency (IEA) predicted in January that global oil supply would grow comfortably in 2026, rising by 2.5 million barrels per day. By October 2025, that forecast had already flipped. Experts were warning of an unwanted surplus — too much oil flooding the market. American and Middle Eastern producers were pumping more, and demand wasn't keeping pace.

Then geopolitics intervened. A U.S.-Israeli conflict with Iran disrupted shipping through the Strait of Hormuz, one of the world's most critical choke points. About 20% of all globally traded oil passes through these waters. When fighting choked the strait, roughly 20% of global liquefied natural gas flows halted, according to Reuters. Suddenly the market flipped again — from too much oil to dangerously little.

By May, President Trump had imposed a blockade on Iranian ports. The IEA revised its forecast sharply downward: instead of predicting growth, they now projected a decline of 3.9 million barrels per day for 2026. A supply shock had replaced the glut.

Around June 17, a U.S.-Iran deal was signed, reopening the strait and easing the immediate crisis. The IEA's June report kept the supply decline estimate largely unchanged for 2026 but projected a rebound of 8 million barrels per day for 2027, once flows fully normalized.

The Problem Underneath the Deal

The strait is open again, but the peace is fragile. Reuters reported on July 1 that 60-day talks between the U.S. and Iran are ongoing, though skirmishes continue. If hostilities resume, the strait could close again within days, and oil prices would swing upward just as quickly.

This fragility shapes everything OPEC+ is doing now. The group faces a market where supply can shift dramatically depending on whether a ceasefire holds. Because such a large share of global oil moves through Hormuz, any major disruption doesn't just affect the Middle East — it reprices crude worldwide within days, rippling through everything from gas prices to shipping costs.

OPEC+'s Difficult Balancing Act

OPEC also has to reckon with weak demand growth. Global oil demand is expected to rise by only 1 million barrels per day in 2026, with most of that growth coming from developing countries outside the wealthiest nations. Meanwhile, the IEA projects global supply could rebound by 8 million barrels per day in 2027 as Hormuz flows normalize.

The math is straightforward: if supply grows by 8 million barrels per day and demand grows by 1 million, the market will swing back toward oversupply — the very problem that existed before the war.

OPEC+ is caught. Cut production too aggressively now while the strait is open, and competitors will grab market share. Cut too little, and they'll face the same glut that was building before the fighting began. Their July 5 announcement signals intent to manage the market, but doesn't commit to any specific production target yet. They're waiting to see whether the ceasefire holds.

The IEA's forecast revision tells the real story. In January, they expected supply to rise. By June, they expected it to fall — a swing of 6.4 million barrels per day in just five months. That kind of shift is a reminder that any forecast for 2027 comes with serious uncertainty built in. The strait is open today. Whether it stays open depends on forces well beyond any OPEC+ meeting room.