Crude Oil: Swimming in OPEC + supply, drowning in risk

The crude market’s once-familiar script—geopolitical risk props prices, OPEC+ trims the taps, and China soaks up the slack—has been flipped on its head. Now, with conflict risk fading, demand waning, and supply spilling over the sides, the oil tape looks more like a leaky bucket than a pressure cooker.

Despite a fragile ceasefire between Israel and Iran, the geopolitical risk premium has all but evaporated. Tankers are still moving through Hormuz, and the crude complex is trading less like a wartime commodity and more like an oversupplied asset. Brent’s recent 13% slide speaks volumes—not about panic, but about plumbing issues. There’s simply too much oil chasing too little demand.

OPEC+ has shifted gears hard, abandoning its long-standing price defense for a high-octane market-share land grab. After months of gradual increases, the cartel is now reportedly eyeing an accelerated return of the full 2.2 mb/d in voluntary cuts—potentially by September. That’s a bold bet on demand elasticity, just as inventories build and China’s crude appetite flattens under the weight of EV saturation, LNG freight expansion, and a cooling macro backdrop.

The motivations are a mix of tactical and political. Riyadh wants barrels back online, Iraq and Kazakhstan have already blown past their quotas, and the White House has made no secret of its preference for cheaper crude. With Trump pushing for lower prices to ease inflation and pressure the Fed into easing, OPEC’s strategy is now as much about diplomacy as supply discipline.

But in doing so, the cartel risks flooding a market already wading knee-deep in surplus. Inventories are building at a clip of roughly 1 mb/d, and non-OPEC+ output—from Guyana to the Permian—is hitting fresh highs. The IEA and sell-side desks alike are bracing for Brent to revisit $60 or lower by Q4 unless something breaks—either demand roars back or the taps get turned back down.

For traders, this is a tape that punishes the complacent. Vol’s been sucked out, but directionality is sloped lower unless OPEC+ blinks or a new headline risk emerges. The pivot from restraint to resurgence is no longer a surprise—it’s the base case.

Bottom line: This is no longer a story of war premiums or mid-cycle demand strength. It’s a market caught between politics and pump jacks, with the balance tipping toward surplus. The path of least resistance? Lower—unless Saturday’s OPEC+ meeting throws the market a curveball.