The next OPEC+ meeting is scheduled for Sunday, June 1. This meeting will play an important role in shaping supply in the world oil market as the group debates its production strategy for July. Speculators are eagerly awaiting to see what the market will bear. New data paints a complicated picture of dynamic forces shaping the impact on oil prices and production decisions.
Those market participants last Tuesday increased their net long positions in ICE Brent by 12,185 lots – a significant jump in positions. This wave increased the total net long position to a record 163,329 lots. This increase shows increasing bullishness among the traders on expected price movement in the future. The market is under pressure. The gross short position in ICE Brent has soared to the highest level on record, up 9,707 lots. This suggests that speculative players are placing short bets against the market, adding to the nervousness going into the OPEC+ meeting.
It remains to be seen whether recent speculative trading positions will prove durable. At the same time, new buying has jumped, ushering 21,892 new lots into the markets. This arrival indicates that many investors are still betting on future appreciation even as fundamental uncertainties continue to play out. The current geopolitical environment plays a key role in each of these uncertainties. In particular, the Iranian nuclear deal appears to be collapsing. A sudden unraveling of this deal may have major repercussions for global oil supply dynamics.
As a result, we anticipate OPEC+ will agree to an increase in OPEC+ output by about 411,000 b/d for July. Analysts believe this boost in production is necessary to meet anticipated demand as the market is projected to be well supplied during the latter half of this year. OPEC+ was looking at a larger supply increase last week, but recent events could have changed their deliberations behind closed doors.
Further complicating these market dynamics are external factors that are sure to squeeze supply chains and increase pricing. This includes a 50% tariff threatened by the United States that will take effect June 1, and which explicitly targets Venezuelan oil on the import and export side. Additionally, following Russia’s escalation of military operations in Ukraine, fears have mounted over the stability of the entire region. We’re pleased to see that President Trump seems to be moving toward imposing new sanctions on Moscow. Such a move would cripple Russian energy flows and further strain global supply chains.
As the OPEC+ meeting approaches, stakeholders will be keenly watching how these geopolitical tensions and market signals influence the organization’s decisions. Far more than outside observers, those deliberations will affect the member nations of OPEC+ directly. They will rattle global oil markets that require stable and predictable supply levels.