OPEC+ announced an increase in oil output by 548,000 barrels per day for August, compared to 411,000 barrels per day in July. This change brings back almost 80% of the previous voluntary cuts of 2.2 million barrels per day from eight OPEC members. Most of the extra supply comes from Saudi Arabia. This boost in production occurs as the global economic outlook appears steady, with strong market fundamentals and low oil inventories. Analysts see this production increase as a way to compete for market share. OPEC+ seems willing to face a potential drop in prices and revenue. As a result, oil prices fell by just over 1% when trading opened on Sunday evening. Looking ahead, Goldman Sachs believes a slightly larger increase may be announced at the next meeting on August 3, predicting a final rise of 550,000 barrels per day for September. This supply change shows a strategic move by the producers, especially Saudi Arabia, to reclaim lost volumes while the global market remains stable. The focus appears to be on regaining control over pricing rather than merely limiting production. It indicates a belief that demand can handle a small increase in supply without causing significant price drops. By adjusting daily output to return about 80% of earlier cuts, the alliance aims to prevent perceived gaps in future consumption. However, the main goal here seems to be securing a long-term market presence while accepting a short-term drop in income per barrel. The slight decrease in prices after Sunday’s market opening was expected. When production rises under otherwise stable conditions, prices tend to fall. What we see now may be positioning for a fuller supply recovery in the third quarter, potentially extending into early autumn, depending on the outcome of next month’s meeting. Goldman’s prediction of another increase in September, though slightly larger, reflects their assessment of exporter intentions: not only to test demand but also to establish new price baselines for crude oil as the year progresses. They also believe that existing inventories, which are still relatively low, won’t easily absorb sharp increases in production. Traders should closely monitor one critical metric: stockpile movement, especially in OECD countries, as an indicator of price stability. For those dealing with options or contracts, the key now is not just the production numbers themselves, but how these figures relate to actual usage and storage data. With limited volatility and stable pricing patterns, there’s little reason to expect major shifts—unless unexpected geopolitical events occur. In the week ahead, it’s crucial to pay attention to inventory reports and import flows, especially from Asia-Pacific refiners. These refiners often adjust their purchasing in response to competitive pricing. A significant rise in crude reserves could put downward pressure on prices, especially in later contracts. While it’s easy to anticipate a sell-off when output increases are announced, it’s often the slow reaction in actual demand that sets the future price trends. Keeping long positions without sufficient support from declining inventories or refinery activity could prove risky. We also need to keep an eye on freight rates and shipping activity. An increase in barrel movement typically leads to higher tanker demand. However, if freight rates remain low, it may indicate that demand is lagging behind the production increases. Such data often comes before official consumption statistics, making it a useful early indicator. Overall, the return to higher volumes is not just about the numbers; it challenges us to understand where the balance lies between price strength and quantity. It’s time to reassess strike levels and delta exposure in light of the changing output trends, while broader volatility is still subdued.

here to set up a live account on VT Markets now