West Texas Intermediate (WTI) Crude Oil prices are currently facing downward pressure due to a forecasted increase in global supply. Right now, WTI is trading above $65.00, showing a daily decrease of 0.55%. Rising OPEC+ production and low demand from US refineries are making the situation worse. Recently, OPEC confirmed it will increase oil supply through the third quarter, driven by demand in Asia and economic recoveries in the US and Eurozone.

OPEC+ Production Increase

OPEC+, which includes Saudi Arabia and Russia, has decided to gradually raise production starting in July. This choice is based on expected steady demand growth in Asia and a recovery in Western economies. In June, OPEC+ output rose by 349,000 barrels per day, bringing the total to 41.56 million bpd. OPEC also predicts that non-OPEC liquids production will grow by 0.8 million bpd by 2025. The American Petroleum Institute will soon release its Weekly Crude Oil Stock report. Market anticipations after last week’s unexpected news suggest a 2 million barrel draw, which could impact WTI prices. Currently, WTI remains above its $65.00 support level. If it breaks below key levels, prices could drop further toward $60.58, with resistance at $66.75. Momentum indicators are showing signs of weakness.

Market Outlook and Strategies

WTI oil prices rely on supply and demand dynamics, political events, and OPEC’s production choices. Inventory data can shift these prices by indicating changes in supply and demand. OPEC sets production quotas, which directly affect oil prices. Due to the downward pressure from rising global supply, we suggest that traders take a bearish stance in the upcoming weeks. The most likely direction for prices appears to be downward, so strategies like buying put options or opening short futures positions may be wise. This way, traders can profit from a potential drop in the commodity’s value. Recent data from the U.S. Energy Information Administration supports this bearish view. It reported an unexpected inventory increase of 3.7 million barrels, contrary to expectations for a decrease. Furthermore, demand is showing signs of weakness, especially in China, where the manufacturing PMI recently fell to 49.5, indicating a contraction. The combination of rising supply and declining demand creates a tough environment for prices. We are closely watching the $65.00 support level. If it breaks, we could see further price weakness and a possible move toward the $60.58 target for our short positions. The weakening momentum indicators give us additional confidence in this downward trend. History tells us that when OPEC increases output in a market with uncertain demand, prices can plummet, as seen in the prolonged sell-off of 2014-2015. While we expect further declines, OPEC’s confidence in an economic recovery in the second half presents a potential risk. To hedge against this risk, we might consider buying out-of-the-money call options with later expiration dates as a cost-effective strategy. The upcoming weekly stock report will be crucial for short-term volatility. If there’s a surprise draw larger than the projected 2 million barrels, it may lead to a temporary price surge. We would view any rally towards the $66.75 resistance level not as a trend change but as a better opportunity to position ourselves in bearish trades. Create your live VT Markets account and start trading now.

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