Oil prices closed at $61.87 on Friday, yet there is potential for further decline. Speculation arises around Saudi Arabia advocating for increased production, which could further decrease crude oil prices. Reports suggest OPEC+ may increase output, though likely less than in October as the summer ends.
OPEC+ has raised production by 2.5 million barrels per day in 2023, reportedly due to pressure from the US. The sub-$60 oil price threatens US shale industry drilling, as evidenced by a decline in the drilling rig count. This decline poses concerns for US oil production in the coming years, possibly affecting prior administration policies.
Opec Production Decisions
OPEC is still withholding 1.65 million barrels per day, pending full production restoration. Discussions focus on gradually reintroducing quantities between 135,000 and 350,000 barrels per day. The macroeconomic impact includes potential benefits for short-term inflation. However, oil prices staying below $60 pose challenges similar to submerging a balloon underwater, reflecting instability.
With crude oil hovering around $85 per barrel, all eyes are on the upcoming OPEC+ meeting. Whispers of holding production steady to support prices contrast with concerns over weakening global demand, creating significant uncertainty. We need to look back at similar situations to understand the potential outcomes.
We saw this play out before in the late 2010s, when OPEC+ production hikes pushed WTI crude down toward $60. That price drop directly threatened the profitability of US shale producers, causing a sharp decline in drilling activity. The market learned that US shale output is very sensitive to these supply decisions.
That lesson is critical today, as the US rig count has only recently shown signs of life, rising 5% year-over-year according to the latest EIA data from August 2025. This fragile recovery depends on prices remaining above the $75 break-even point for many producers. Any surprise production increase from OPEC+ could halt this momentum almost immediately.
Oil Market Volatility and Strategies
Given the uncertainty, implied volatility on oil options is increasing. A potential strategy is to use options to bet on a large price swing, regardless of direction, using November contracts. A long straddle, for example, would profit from a significant move either up or down following the meeting’s announcement.
In the bigger picture, any price drop caused by a production increase would likely be short-lived, much like holding a balloon underwater. A fall in prices now would curb US investment, tightening supply for 2026. This would set the stage for a stronger price rebound once demand stabilizes.
