OPEC+ will meet on July 6 to discuss raising oil production for August by 411,000 barrels per day. Russian Deputy Prime Minister Alexander Novak stated that the final decision will be made during this traditional meeting. Since April, OPEC+ has been slowly increasing oil output, adding 411,000 barrels per day each month. This gradual rise aims to reverse earlier voluntary cuts of 2.2 million barrels per day. This month-by-month increase reflects a careful approach to unwind past reductions. The voluntary cuts were originally made due to uncertainty in demand and stagnant prices. Since April, however, we’ve seen a steady return to higher production. This helps balance the market by meeting growing demand without oversupplying inventories. Novak’s remarks highlight that group consensus is crucial, with policy decisions confirmed at the July 6 meeting. With this plan for a consistent monthly increase, the supply side looks predictable in the short term. This stability can help set pricing expectations, although the market can still respond to changes in demand or trader sentiment. It’s unlikely that the rate of increase will exceed the current plan of 411,000 barrels per day. Therefore, we can expect traders in options and futures markets to closely follow this output guidance without major surprises. For those focusing on derivatives, this consistent pattern is important. The eased supply from OPEC+ is already reflected in many mid-term contracts. Therefore, volatility spikes are more likely to come from shifts in demand—like changes in refinery usage or transport fuel consumption—rather than from production changes. Pricing now reacts more to demand outlooks than to production adjustments, especially when these adjustments are well communicated. The July meeting will likely act as a checkpoint rather than a pivotal moment. Since previous production increases have been gradual and stable, pricing models expect this trend to continue rather than change significantly. Consequently, spread structures have become stable within a manageable range. For short-term options expiring in late July or early August, implied volatility is low compared to historical levels. At the same time, there’s been a rise in strategic interest in contracts for September and October. This interest is driven by U.S. economic data that varies with seasonal oil demand from power generation and travel. Different expectations can create opportunities for traders as they navigate through standard supply guidance. The chances of unexpected moves in OPEC+ strategy seem limited. However, any significant changes—like non-compliance or geopolitical issues—could quickly affect pricing benchmarks. We suggest protecting long-term positions with spreads connected to refinery margins, which can safeguard against gradual shifts while responding to short-term signals. Execution is crucial, especially when market liquidity decreases around regional holidays or reporting periods. In the upcoming weeks, it’s important to analyze backwardation levels and storage dynamics to see if futures prices reflect actual barrel movement or just speculative activity. As output increases as planned, futures curves may provide less directional signals and more stability.

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