OPEC+\u2014which includes Russia\u2014agreed to lift its oil output targets by 188,000 barrels a day from August. The decision follows similar increases for June and July, extending the group\u2019s steady adjustment to supply policy.<\/p>\n
With the August rise in place, the production restraint introduced in 2023 would be fully reversed if OPEC+ opts for one more increase of around the same size for September. The next meeting to consider output levels is scheduled for 2 August.<\/p>\n
We see this planned production increase as a cap on crude oil prices for the near term. Recent data shows West Texas Intermediate (WTI) futures have been trading in a tight range around $85 per barrel, reflecting uncertainty. The latest Energy Information Administration (EIA) report from last week confirmed a modest inventory build of 1.5 million barrels, suggesting supply is beginning to meet demand.<\/p>\n
Given this expected supply boost for August, we are cautious about significant price upside in the coming weeks. We believe selling out-of-the-money call options on September crude futures offers a compelling strategy. This allows us to collect premium while betting that prices will not surge past key resistance levels before the next OPEC+ meeting.<\/p>\n
The upcoming August 2nd meeting is the next critical event that could introduce volatility. Historically, these meetings can surprise the market; for instance, the unexpected deep cuts in late 2024 caused a price spike of over 8% in a single day. Therefore, we are also considering purchasing long-dated puts to hedge against any bearish surprise, such as a larger-than-expected production increase.<\/p>\n
We are also closely watching the WTI-Brent spread, which currently sits just below $5. With most of the additional production coming from OPEC+ members, this should theoretically place more pressure on the Brent benchmark. A trade that bets on this spread narrowing could prove effective through late July and August.<\/p>\n\n\n\n