Eight OPEC+ members have decided to lower their production restrictions even more, opting for a smaller increase of 137,000 barrels per day instead of larger rises. From April to September, OPEC’s production rose by 1.7 million barrels daily, averaging 340,000 barrels each month. Initially, oil prices increased, but they quickly fell back due to a positive supply outlook.

OPEC’s Recent Decision

OPEC+’s choice to boost production, even slightly, hints at a bearish view for oil prices. After the announcement, the market struggled to hold onto its gains, indicating that supply concerns are fading. This suggests a well-supplied market as we head into the fourth quarter. The latest report from the Energy Information Administration (EIA) backs this up, showing an unexpected rise in U.S. crude inventories by 2.8 million barrels. With WTI crude prices around $79 per barrel, this extra supply puts pressure on a market already showing weakness. These inventory increases have been a regular trend for the past month. On the demand side, recent purchasing managers’ index (PMI) data from Europe and China fell below expectations, signaling a slowdown in global manufacturing. This weakens the argument for strong oil consumption as winter approaches. The strong demand recovery many expected for early 2025 hasn’t materialized.

Strategies for Traders

In light of this situation, traders might want to consider buying put options on December WTI or Brent contracts. This strategy offers downside protection and potential profits if prices keep dropping as supply outpaces waning demand. It allows traders to express a bearish view with a defined risk over the coming weeks. Another strategy is to create bear call spreads, where you sell a call option and simultaneously buy a call option further out of the money. This generates an initial credit and can profit from falling oil prices or a sideways market with declining volatility. This approach is ideal for those who believe prices will remain below the $82-$84 range. We can reflect on late 2024 when slow supply increases coincided with concerns about economic growth, which kept prices in check. This historical trend suggests that the current market does not favor a significant price increase. The most likely path for oil in the coming weeks seems to be sideways or down. Create your live VT Markets account and start trading now.

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