Crude Oil: Swimming in OPEC + Supply, Drowning in Risk
OPEC+ has shifted gears hard, abandoning its long-standing price defense for a high-octane market-share land grab.
The crude market’s once-familiar script—geopolitical risk props prices, OPEC+ trims the taps, and China soaks up the slack—has been flipped on its head. Now, with conflict risk fading, demand waning, and supply spilling over the sides, the oil tape looks more like a leaky bucket than a pressure cooker.
Despite a fragile ceasefire between Israel and Iran, the geopolitical risk premium has all but evaporated. Tankers are still moving through Hormuz, and the crude complex is trading less like a wartime commodity and more like an oversupplied asset. Brent’s recent 13% slide speaks volumes—not about panic, but about plumbing issues. There’s simply too much oil chasing too little demand.
OPEC+ has shifted gears hard, abandoning its long-standing price defense for a high-octane market-share land grab. After months of gradual increases, the cartel is now reportedly eyeing an accelerated return of the full 2.2 mb/d in voluntary cuts—potentially by September. That’s a bold bet on demand elasticity, just as inventories build and China’s crude appetite flattens under the weight of EV saturation, LNG freight expansion, and a cooling macro backdrop.
The motivations are a mix of tactical and political. Riyadh wants barrels back online, Iraq and Kazakhstan have already blown past their quotas, and the White House has made no secret of its preference for cheaper crude. With Trump pushing for lower prices to ease inflation and pressure the Fed into easing, OPEC’s strategy is now as much about diplomacy as supply discipline.
But in doing so, the cartel risks flooding a market already wading knee-deep in surplus. Inventories are building at a clip of roughly 1 mb/d, and non-OPEC+ output—from Guyana to the Permian—is hitting fresh highs. The IEA and sell-side desks alike are bracing for Brent to revisit $60 or lower by Q4 unless something breaks—either demand roars back or the taps get turned back down.
For traders, this is a tape that punishes the complacent. Vol’s been sucked out, but directionality is sloped lower unless OPEC+ blinks or a new headline risk emerges. The pivot from restraint to resurgence is no longer a surprise—it’s the base case.
Bottom line: This is no longer a story of war premiums or mid-cycle demand strength. It’s a market caught between politics and pump jacks, with the balance tipping toward surplus. The path of least resistance? Lower—unless Saturday’s OPEC+ meeting throws the market a curveball.
who knows? the painting of these trends based on demand/supply often seem dreadfully
obvious and long term, but appear, dissapear more evanescently. there are multiple
factors: preference for hybrid over EV, a trumpy return to gas powered cars, a need to restore reserves. and prospective omnivorous ai demands for power suggest a counter move is not out of the question. right now the non-ai economy looks recessionary, but the stim side of the republican budget plan, if you can call it a plan, and oversea rate cuts, may provide at least a temporary lift to general economic activity. we've been seeing industrials rallying more than is immediately justified, suggesting more activity coming up, and the industrials rely on oil, so the one tends to lift the other. the iranians are banning the international atomic energy supervisors
and if iran moved partially refined uranium and centrifuges to other locations they may have resumed further refinement already. Israel is gathering intel now, and the ceasefire is really just a lower level of ongoing conflict. likely to be followed by a further assault. having gone this far, the israelis must finish the job, go for the jugular, which may disrupt energy supplies.
these are all suppositions, but it's certain that excess oil and gas supply is at least partially
priced in, while the sp500 is not pricing in a recession. take a took at the felder report, 'the bull case for energy' where he passes on a chart of how a disjunction this wide in the sp500 to
oil and gas pricing always leads to a major reversal, altho it may take time. so i bought some XOM and XLE after the ceasefire, and am looking at COP. i'm trading it at the periphery and bought some ERJ a non usa, non-BA, sound south american richie rich pleaser of a small jet builder that can trade around our tariffs to hedge the oil exposure. (and recoiled in a lot of SGOV, a best of the bunch ai leg, 'quality' stocks and dividend stocks...) . i adjust depending on where things go, like i trimmed profits in NVDA after a too wicked rally and humungous insider selling...
there's more than one way to skin a cat, and i'm not quick witted enough to trade day by day
currency flux- that's heavy sledding.