OPEC+ plans to increase oil production by 548,000 barrels per day in August, exceeding earlier expectations. Previously, they aimed for monthly increases of 411,000 barrels per day for May, June, and July. This decision comes as the global economy remains stable, with healthy market fundamentals marked by low oil inventories. Media sources report that OPEC+ will review the 548,000-barrel increase for September during its upcoming meeting on August 3. This rise in output signals a shift from years of controlled supply. OPEC+ seems to be focusing more on capturing market share, responding to US shale drillers reclaiming some of their lost volumes. Earlier this year, OPEC+ announced a cut of 2.2 million barrels per day. The recent 411,000 barrel increases are part of reversing these cuts, while the new 548,000 boost speeds up the process. Even with this increase, OPEC+ has 1.66 million barrels per day of extra capacity. However, actual production might not hit these targets. This announcement shows a clear intent to reduce restrictions faster than expected. Instead of following the cautious approach outlined earlier, OPEC+ is now more confident, driven by stronger demand and low inventory levels at major storage locations. These conditions have made it difficult for prices to remain stable recently, leading supply efforts to align with consumption trends. The upcoming reassessment of the increase introduces a conditional element. It doesn’t indicate uncertainty, but shows an understanding that short-term adjustments may be needed. OPEC+ is prioritizing flexibility over a fixed plan. Challenges may arise if demand does not keep pace or if price fluctuations provoke political issues in smaller producer countries. Additionally, OPEC+’s shift from strict volume management aims to keep up with non-OPEC producers. Riyadh’s recent actions are a response to increased drilling outside of OPEC. The large but unused spare capacity highlights that OPEC+ isn’t completely giving up their buffer, keeping it as a safety net. Traders shouldn’t assume these production increases will smoothly reach terminals. Past behavior shows that actual deliveries can slow down, especially in places where infrastructure is lacking or production targets exceed technical limits. Supply delays often occur during changes like this, usually unnoticed until they affect physical markets. With the forward curve showing comfort now and some tightening expected later, we believe the prompt market will respond more to actual supply decreases than to proposed increases. This trend has been consistent for over a year and continues to influence options strategies. Additionally, daily volatility is low, which can be misleading; even slight changes to promised flows could lead to a spike in volatility. Given this context, fixed strike sell volumes further into the future will likely be tied to news risk, especially with the group’s next update on the horizon. However, we expect adjustments in the short term as the physical supply becomes clearer. For any sustained changes to occur, spot barrels must begin to follow the trend. Until then, daily price movements will likely be volatile with a focus on inventory data. Short-term indicators may overreact at the start of trading sessions, so it’s crucial to assess entry points carefully. Watch for strong physical indicators, especially exports and activity at key hubs, before taking broader positions. Inter-month spreads may provide cleaner opportunities if production partially materializes.

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