Insights 
VT 
Oil prices are under pressure as OPEC+ plans to accelerate the unwinding of 2.2 million bpd output cuts, with plans to increase production by 960,000 bpd from June. The tension between the US and China has contributed to concerns over reduced oil demand.
West Texas Intermediate (WTI) futures have rebounded slightly from a low of $55.14 to $57.30. Despite this, WTI remains nearly 1.5% below last Friday’s closing price.
Opec+ Output Increases
OPEC+ intends to gradually increase oil output by 138,000 bpd each month from April until reaching the 2.2 million bpd cut by September 2026. In May, the growth rate increased to 411,000 bpd, set to rise to 960,000 bpd in June.
Uncertainty in oil demand grows with US President Trump’s recent tariffs announcements. Hopes for bilateral trade deals exist, but the US-China tensions persist.
China’s GDP forecasts have been revised amid the trade conflict. China, as the world’s largest oil importer, faces a slowdown, affecting global oil demand.
WTI, a type of light, sweet crude oil, is a key benchmark in the oil market. It reflects global economic activity and is affected by supply, demand, and geopolitical factors.
Overall, what we’re observing in oil markets right now reflects the direct impact of both supply-side changes and renewed concerns over global economic health. With the planned easing of OPEC+ output cuts, there’s a notable shift in the near-term production outlook. The decision to move forward with a sharper production ramp-up — reaching a projected 960,000 barrels per day in June — has already sent ripples through the futures markets. Brent and WTI reacted as expected, with volatility picking up as traders reassess short and medium-term positioning.
The small rebound in WTI prices after dipping to $55.14, now up to $57.30, may look like a small recovery at first glance. However, with the price still below last week’s closing level, upward momentum hasn’t yet established itself. It’s more corrective than trend setting. What this price action implies is that the earlier drop wasn’t fully priced in or supported fundamentally for a deeper selloff — yet forward uncertainty remains relatively high.
Trade Tensions And Demand Concerns
Much of it hinges on external demand conditions. Washington’s moves — particularly the tariffs introduced by Trump’s administration — have dampened enthusiasm over a strong demand recovery. While there’s cautious optimism in some quarters that bilateral negotiations might resume, the rhetoric coming from both capital cities hasn’t loosened perceptions of a prolonged standoff.
Beijing lowering its own growth projections is already casting a shadow across multiple commodities, but oil tends to react more sharply. Considering how much crude China imports annually, any cooling off in its industrial output or broader consumption manifests directly in the futures curve. We’ve already started seeing this in widening contango structures for some delivery points.
In derivative terms, the implied volatility is still modest relative to historical extremes, but directional bias has turned slightly bearish on short-dated contracts, especially for WTI. Open interest movements suggest there’s fresh positioning into calendar spreads, focussing on the widening divergence between short and long-term contracts. Activity within June and July contracts has shown more aggressive sell-side flows in recent sessions.
From our perspective, the most sensible course of action in the weeks ahead is to monitor pace and consistency of updates to OPEC+ guidance. While the scheduled production increases are already laid out, it’s not unusual for these policies to be adjusted quickly in response to price swings or shifting demand forecasts. Any deviation from the current path would likely introduce fresh volatility.
Keep an eye on Chinese import data when it’s released — particularly storage levels and refining margins. Those will likely give early clues if physical demand is indeed matching recent government forecasts. If stock levels continue to creep up while refinery utilisation moderates, that could further pressure front-month contracts.
Watching U.S. crude stockpile levels will also help confirm if slack demand abroad is reflecting in domestic inventory buildup. We’re anticipating at least moderate fluctuation in DOE figures over the next few weekly releases, particularly in Cushing.
The pricing power moving forward rests not only within geopolitical headlines and OPEC compliance but also with downstream indicators. If margin pressure mounts in Asian or European refining, a chain reaction could return selling pressure back to futures — particularly those linked to cracking yields.
Continue to monitor the dollar index in parallel. Recent strength in USD has provided an additional headwind to crude, particularly as contracts become more expensive abroad. If FX markets remain tight and dollar liquidity continues tightening, it could reinforce commodity weakness for non-U.S. buyers — creating another feedback loop into oil futures.
In adjusting exposures, flexibility remains key. Tail hedges through out-of-the-money puts in deferred months provide reasonable downside coverage with relatively low premiums right now. Spreads may need modifying if contango deepens further into late Q3.
Time spreads between July and September remain of interest. Dislocations may widen, and arbitrage opportunities could present themselves should shipping constraints or storage bottlenecks emerge. We’ll re-evaluate as fresh allocation reports become available.
