Insights 
VT 
OPEC’s recent monthly report anticipates a robust second half of 2025 for the global economy, noting the first half exceeded expectations. They project a rise in non-OPEC supply by 730,000 barrels per day (bpd) in 2026, revised from an earlier estimate of 800,000 bpd, and expect US shale production to remain stable that year.
In May, OPEC+ saw an increase in crude output by 180,000 bpd. On the oil price front, WTI crude reached $77.49 but later fell to $71.98, a decrease of $1.00, influenced by positive developments in Iran-Israel relations.
Global Economic Outlook And Oil Production
The existing content essentially outlines a positive outlook for the global economy going into the latter stages of 2025. The first part of the year has already performed above prior forecasts. OPEC, that is, the Organisation of the Petroleum Exporting Countries, is now anticipating slower growth in non-OPEC oil supply for 2026 compared to their previous estimate, trimming their outlook by 70,000 barrels per day. Stability in shale oil production coming from the United States has also been highlighted, indicating less likelihood of disruptive shifts in output there. Meanwhile, the broader group of oil producers referred to collectively as OPEC+ increased their total crude production by 180,000 barrels per day in May, despite ongoing efforts to stabilise prices through coordinated supply management.
Recent price action in the oil market tells us something quite plain. Futures for WTI crude – that’s the US benchmark for oil – climbed towards $77 earlier this month but have since dropped, ending the session referenced at just under $72. This downward pressure, the text suggests, was driven largely by signs of warming relations between two countries in the Middle East, thereby softening fears of fresh conflict that would otherwise support higher energy prices.
From where we stand, this combination of a tightening supply forecast for next year and softening geopolitical tensions calls for a more watchful approach. For those trading derivatives tied to crude oil, particularly futures and options, the message here is straightforward: we’re in a zone where economic optimism is balanced by a very real recalibration of supply metrics and cooling of headline risks.
The revised expectations for non-OPEC output bring about reduced expectations of oversupply in 2026, especially when considering that shale contributions from the US are also seen holding steady rather than expanding. That alone may lend underlying support to prices next year. However, the bump in May production could act as a short-term limiter on rallies unless matched by stronger demand data or fresh policy signals from the group.
Volatility And Price Discovery
Volatility in the oil market tends to cluster around moments of sentiment change. The recent move in prices – dropping despite generally firm supply data – may suggest sentiment is now being dominated less by supply fears and more by geopolitical de-escalation. We should be tracking whether this narrative continues, as well as watching for signals from key producers about future coordination.
Considering the relatively modest price movements and declines even amid higher output, implied volatility on short-dated contracts could be near re-pricing levels. Tail risk demand may lessen if tensions in the Middle East remain muted. Spreads between front- and second-month futures may narrow further, so those running calendar spreads need to manage carry more tightly in the near term.
We are seeing very little indication of breakout risk on the upside for now, which in turn leaves skew on options possibly overpriced – particularly further out on the curve. Traders should evaluate positioning across both delta and vega exposures, adjusting for a market that is leaning more towards repricing macro growth than reacting strictly to physical supply metrics.
Lastly, the update dampens any thesis predicated on rapid US shale growth disrupting balances in 2026. That assumption, now put aside by OPEC itself, lowers forward supply uncertainty but highlights a market more guided by demand alignment than one being driven by upstream surprises. We will need to continue monitoring forward curves – especially from Q3 onwards – to assess whether risk starts shifting towards the demand side again.
Market direction may not swing violently, but price discovery is very much active. Moving through the coming weeks, it’ll be essential to keep positioning fluid and responsive.
