Insights 
VT 
OPEC maintains its forecast for an increase in oil demand by 1.3 million barrels per day for this year and the next. However, the trade conflict presents demand risks, urging cautious treatment of these forecasts.
The organisation has also lowered its expectations for non-OPEC+ oil supply. The reduction in supply is influenced by lower oil prices, which hinder the expansion of US oil production.
Impact Of Supply Deficit
According to OPEC, this situation could result in a supply deficit, offering room for a boost in OPEC+ oil production. Despite this possibility, there is criticism regarding the optimistic nature of these demand forecasts.
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Challenges In Forecasts
The latest statement from the Organisation of the Petroleum Exporting Countries (OPEC) maintains a forward-looking stance on oil demand growth, projecting a daily increase of 1.3 million barrels this year and next. While on the surface this speaks to expectations of stable or improving economic activity across certain regions, underlying tensions around global trade disputes complicate the picture. The suggestion here is not a certainty of continued demand growth, but rather a cautiously optimistic outlook, one that assumes current macroeconomic tensions will not worsen markedly.
That said, non-member supply is being revised downward. Particularly, production from outside the alliance, especially the United States, is expected to slow. Lower prices seem to be directly limiting upstream investment, which is the process of drilling and developing new oil sources. This suggests that companies are pulling back on aggressive drilling initiatives, especially where projects no longer remain profitable under compressed margins. These are not small players either—the pullback is apparent even among major US producers with formerly robust supply pipelines.
Reading this together, we see the possibility for a tighter supply environment in the near term. A drop in output outside the OPEC+ alliance, paired with steady or slightly growing demand, could result in undersupplied markets—at least temporarily. That opens the door for the alliance to revise its own output restrictions, possibly increasing production to stabilise prices or maintain its market share. Yet scrutiny continues over whether the demand estimates are overly inflated, potentially underestimating the drag from higher global interest rates, slower economic growth in China, and uncertainties around energy transition goals.
Now, for those navigating futures and options across the energy complex, we notice over-reliance on optimistic demand figures introduces asymmetric risk. In strategy planning, what appears to be an easy assumption of upward price motion could be challenged bluntly by unforeseen demand weakness. Risk here is not hypothetical—it translates into real capital movement and pricing pressure as positions rebalance.
We’ve started seeing wider volatility bands on longer-dated oil options, especially across Brent contracts. That’s not a coincidence, but a reflection of mounting friction between supply-and-demand forecasts and real-world macroeconomic signals. The implied volatility tells us positioning is becoming more defensive, not less. There’s no denial of the supply risks or isolated demand strength from emerging regions, but clearly, the distribution of outcomes has broadened.
Compounding this are mixed signals across commodity-linked equities. Some of the energy majors are rolling back capital expenditure estimates, while others press on, expecting a higher price floor in the second half of the year. Disparities like these point to a fractured consensus, making it harder for directional positions to hold without wider downside covers.
For us, the challenge is not deciding whether oil will rise or fall, but adjusting probability weights carefully over the weeks ahead. Probabilities that shift too slowly become liabilities. This is a low-conviction moment with a high cost of being wrong. Position sizing needs discipline—overshooting conviction, whether towards a bull or bear bias, risks amplifying volatility drawdowns.
Keep in mind that even if OPEC were to adjust its official output upward, timing matters. Delays or poorly coordinated communication could result in abrupt price dislocations. We’ve watched this happen before—orders and compliance don’t always travel at the same speed.
So attention now may shift more closely to inventory builds, shipping volumes, and rig counts from non-aligned producers. These hard datapoints shape expectations more than verbal guidance. They also serve as early warnings for inflection in supply. We would expect large desks already to be increasing hedging ratios, especially in structurally exposed sectors.
This is also the first time in several quarters where realised volatility across energy commodities started to exceed implied, albeit modestly. That warrants close observation. It means the modelled expectation is being outpaced by market moves themselves. Expect this to influence rehedging timelines and reset spreads across energy complex options.
As always, clear asymmetries are rare. But misalignment between stated expectation and actual production or consumption figures—particularly across major importing economies—will create free-form adjustments in the derivatives space. Participants who can remain adaptive to these gaps will outperform those anchored to headline outlooks alone.
