The crude oil market traded with sharp volatility this week as traders balanced OPEC+ production increases, renewed geopolitical risks, and the threat of U.S. tariffs against evidence of strong underlying demand. This interplay shaped price action, with the market testing downside levels but finding bids on signs that supply additions may be absorbed more easily than feared.
OPEC+ Supply Increases Pressure Oil Prices Forecast
OPEC+ made headlines by announcing a 548,000 bpd production increase for August, a sharp acceleration from the previous pace of 411,000 bpd. This move unwound nearly 80% of the 2.2 million bpd voluntary cuts from members including Saudi Arabia, Russia, and the UAE, sparking a quick bearish reaction as prices slipped on concerns over additional barrels hitting the market.
However, the market quickly recognized that real additions often fall short of announced targets. Saudi Arabia has carried most of the load, limiting the effective supply shock. Sources suggested OPEC+ may add another 550,000 bpd in September, completing the unwinding cycle, but hinted at a possible October pause if seasonal demand slows.
Adding complexity, Houthi attacks in the Red Sea, including a deadly ship sinking, injected fresh geopolitical risk, tightening risk premiums on shipping lanes that carry critical crude flows.
U.S. Tariff Threats Hit Oil Prices Projections
President Trump’s aggressive tariff posture emerged as a bearish anchor for…
The crude oil market traded with sharp volatility this week as traders balanced OPEC+ production increases, renewed geopolitical risks, and the threat of U.S. tariffs against evidence of strong underlying demand. This interplay shaped price action, with the market testing downside levels but finding bids on signs that supply additions may be absorbed more easily than feared.
OPEC+ Supply Increases Pressure Oil Prices Forecast
OPEC+ made headlines by announcing a 548,000 bpd production increase for August, a sharp acceleration from the previous pace of 411,000 bpd. This move unwound nearly 80% of the 2.2 million bpd voluntary cuts from members including Saudi Arabia, Russia, and the UAE, sparking a quick bearish reaction as prices slipped on concerns over additional barrels hitting the market.
However, the market quickly recognized that real additions often fall short of announced targets. Saudi Arabia has carried most of the load, limiting the effective supply shock. Sources suggested OPEC+ may add another 550,000 bpd in September, completing the unwinding cycle, but hinted at a possible October pause if seasonal demand slows.
Adding complexity, Houthi attacks in the Red Sea, including a deadly ship sinking, injected fresh geopolitical risk, tightening risk premiums on shipping lanes that carry critical crude flows.
U.S. Tariff Threats Hit Oil Prices Projections
President Trump’s aggressive tariff posture emerged as a bearish anchor for oil markets, threatening 50% tariffs on Brazilian exports while outlining broader tariffs on copper, semiconductors, and pharmaceuticals. The administration also sent letters to the Philippines, Iraq, South Korea, and Japan, raising concerns of an escalating global trade war.
These developments stoked fears of slowing global economic growth, potentially weighing on oil demand. Markets reacted sharply midweek, with crude prices falling over 2% as traders priced in demand risks.
The Federal Reserve complicated sentiment further by signaling limited appetite for near-term rate cuts, citing inflation concerns tied to potential tariffs. This stance increased expectations of higher-for-longer interest rates, which could reduce borrowing, slow economic activity, and dampen energy demand.
Inventory Data Sends Mixed Signals
Inventory data added to the market’s confusion. The American Petroleum Institute reported a surprise 7.1 million-barrel build, shocking traders who expected a draw of 2.8 million barrels. This unexpected swing shook confidence in the near-term supply-demand balance.
However, the EIA reported the same 7.1 million-barrel build included a 1.8 million bpd adjustment item for unaccounted crude, softening fears of a fundamental demand breakdown. Meanwhile, gasoline inventories fell by 2.7 million barrels, double the expected draw, while gasoline demand surged 6% to 9.2 million bpd during the July 4 holiday, supporting summer demand projections.
Strong Demand Fundamentals Offset Bearish Headwinds
Despite tariff fears and OPEC+ supply additions, underlying demand fundamentals remained robust. Global daily flights hit a record 107,600 in early July, and port activity remained healthy, signaling sustained transport and trade demand.
The EIA’s forecast of lower U.S. production in 2025 due to slowing drilling provided a bullish medium-term counterbalance to immediate supply concerns. Traders took note that U.S. supply constraints could tighten the market, offsetting incremental OPEC+ supply.
Market Absorption Capacity Supports Oil Prices
DBS Bank analysts noted that despite the supply additions, markets appear to need these barrels, preventing large inventory builds. UBS emphasized that the oil market remains tight, with effective supply increases often smaller due to overproduction offsets among OPEC+ members.
This absorption capacity explains why crude did not see a steeper sell-off despite aggressive production increases, reinforcing confidence that the market can digest additional barrels under current demand conditions.
Long-Term Oil Demand Outlook Remains Constructive
OPEC’s latest World Oil Outlook provided a constructive long-term demand narrative, even after trimming forecasts for the next four years due to slower Chinese growth. OPEC expects global demand to hit 105 million bpd this year and climb to 111.6 million bpd by 2029, well above the IEA’s projected 105.6 million bpd peak.
This forecast underscores that India, Africa, and the Middle East will drive future demand growth, supported by slower energy transition in developing economies, offering a fundamentally bullish backdrop despite near-term volatility.
Weekly Light Crude Oil Futures
Trend Indicator Analysis
The main trend is up according to the weekly swing chart. However, a trade through $64.00 will shift momentum to the downside. Despite the steep sell-off and the potentially bearish closing price reversal top the week-ending June 20, the market has not followed through to the downside, suggesting the presence of buyers.
Holding above the 52-week moving average at $65.75 indicates buyers are defending against another plunge. However, the inability to sustain a move over the long-term pivot at $67.44 indicates there is not enough bullish pressure at this time to drive the market higher. Essentially, traders are awaiting a fresh catalyst to drive the next major move.
There are two other pivots to note. The April bottom at $52.49 and the June top at $78.40 has formed a pivot at $65.44 that has acted as support the past three weeks. Additionally, the short-term range is $78.40 to $64.00. If there is a breakout to the upside then its pivot at $71.20 will become the initial upside target.
Weekly Technical Forecast
The direction of the Weekly Light Crude Oil Futures market the week ending July 18 is likely to be determined by trader reaction to $67.44 and $65.44. The pivotal indicator will be the 52-week moving average, currently at $65.75.
Bullish Scenario
A sustained move over $67.44 will signal the presence of buyers. If this creates enough upside momentum, we could see a near-term rally into a minor pivot at $71.20. The major upside target is the resistance zone at $78.40 to $82.31.
Bearish Scenario
A sustained move under $65.44 will indicate the return of sellers. If it generates enough downside momentum, we could witness the start of a prolonged down move into the support zone at $53.31 to $51.98.
Crude Oil Market Outlook: Mildly Bullish Into Summer Driving Season
Despite supply additions and trade war risks weighing on near-term sentiment, strong gasoline demand, resilient travel activity, and the market’s absorption capacity for new supply limit downside pressures. Geopolitical risks in the Red Sea and the possibility of lower U.S. production ahead also support the floor for prices.
Forecast: The crude oil market leans mildly bullish heading into the peak summer driving season, with prices likely to find support on dips, provided demand resilience continues and OPEC+ remains cautious in executing further supply increases.
Technically, reaction to the 52-week moving average at $65.88 and the long-term pivot at $67.44 should set the tone for the week.