OPEC+—which includes Russia—agreed 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’s steady adjustment to supply policy.
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.
Crude Price Outlook and Option Strategies
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.
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.
Upcoming Volatility and Spread Opportunities
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.
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.
