Insights 
VT 
Saudi Arabia is advocating for OPEC+ to continue its accelerated oil production increases over the next few months. The goal is to regain market share, with plans to add at least 411,000 barrels per day in August and potentially September.
This marks a strategic shift for Saudi Arabia, moving away from defending prices through output cuts. Instead, the focus is on boosting supply, even if it results in lower prices. Other OPEC+ members, including Russia, Algeria, and Oman, have expressed a desire to halt these increases.
High Seasonal Demand
Saudi Arabia justifies its approach by citing high seasonal demand. The next OPEC+ meeting on July 6 will determine the production policy for August.
What the analysis tells us so far is clear: Saudi Arabia has pivoted from its usual role of supporting oil prices through production restraint to one where regaining market share takes priority. This comes at a time when some members of the alliance are cautious, perhaps concerned that too much supply at once could depress prices further than desired. Russia, for example, is less enthusiastic – and their reasoning likely lies in balancing short-term budgetary needs against long-term export reliability.
The short-term plan looks set: a push to release 411,000 barrels more per day in August, and potentially the same pace into September, which would amount to a considerable increase over a relatively compact period. It’s not just a shift in policy – it’s a deliberate recalibration in how the group aims to influence the oil markets.
We can reasonably assume three things. First, Saudi Arabia is betting on high summer consumption to absorb extra barrels without causing a price collapse. Second, it’s willing to temporarily surrender some revenue per barrel in exchange for a better hold on physical market share. Third, the July 6 meeting will likely be a focal point for any friction within the group, especially if anyone tries to delay or walk back these plans.
Broader Pricing Environment
One must also consider the broader pricing environment: Brent has traded within a range that offers room for mild downward pressure without immediately endangering fiscal stability for producers. That said, if other countries in the pact dig in their heels and limit participation, Riyadh could end up carrying a disproportionate lift in supply, which might blunt their impact.
From a trading perspective, this mixture of policy divergence and added volume introduces new price dynamics. Short-term spreads are set to reflect inventory builds or draws – definitely one to watch through July into mid-August. For us, that means focusing our modelling more heavily on near-dated volatility, rather than assuming longer-term trends will hold.
Interventions like these tend to suppress implied volatility temporarily, but can introduce heavy shifts in realised moves – something we’ve seen during past coordination breaks. We should watch for whether backwardation softens in the coming weeks, particularly around physical cargo data out of Asia and refinery run rates from India and China.
On a more granular level, observing product crack spreads may offer confirmation of whether end-user demand is in line with Riyadh’s expectations. If gasoline and jet margins weaken despite the increase, it may hint that consumption isn’t strong enough to sustain the new path.
As the meeting date approaches, pricing of out-of-the-money calls and puts on oil benchmarks will likely diverge. We’ll want to assess whether the skew begins favouring downside protection, which could tell us about broader sentiment heading into the decision. For now, options premiums remain relatively moderate, but that may not last if forward guidance becomes more fragmented.
Watching open interest build-up around those dates could help us fine-tune our exposure. If speculative length starts unwinding ahead of July 6, it may suggest positioning is shifting away from bullish bets – worthwhile insight for structure placement.
The clarity in this policy shift is rare, but its success depends heavily on coordination and timing. Traders would do well to keep models responsive and recalibrate position sizing with data hitting the tape. The next set of agency forecasts could alter expectations quickly – and we’ll adjust accordingly.
