Oil slides to the lowest level since June
West Texas Intermediate was on track for its largest weekly loss since June before paring declines on Friday. The November contract settled at $60.88/Bbl, down $4.84 from last Friday’s settle of $65.72/Bbl.
Attention now shifts to the OPEC+ meeting on October 5. Earlier this week, one delegate suggested the group might accelerate its latest round of supply hikes—about 500 MBbl/d over the next three months through January. Other members quickly refuted that claim. OPEC+ has already pledged to restore the 2.5 MMBbl/d previously withheld through September and, as of last month, committed to releasing barrels from its 1.66 MMBbl/d tranche of held-back supply.
As Bloomberg noted, OPEC+ has likely taken comfort in the market’s response to its supply policy. Oil curve structure has remained in backwardation, but nearby time spreads are softening as the curve flattens ahead of this weekend’s meeting.
WTI retains backwardation through May 2026 as of October 3. However, forecasted balances show inventories rising this quarter and into 2026, a development that could push the curve into contango and pressure the front end. Similar concerns were voiced at the Argus Global Markets conference this week, where Martijn Rats noted: “We are all waiting for these ballooning global stocks to finally show up in Atlantic Basin crude. At some point they’re going to build, and then we’re going to go to contango.”
AEGIS recommends utilizing swaps as we maintain a bearish view and swaps provide the strongest protection. For longer-dated hedges such as Cal 2027 and Cal 2028, costless collars may be considered. In fact, the longer term could be bullish: projected non-OPEC+ supply growth may be flat to negative by then, while OPEC+ spare capacity could be minimal.
Crude Oil Factors
Geopolitical Risk Premium. (Bullish, Mostly Priced In)President Trump urged NATO allies to shoot down Russian aircraft violating allied airspace and pressed Turkey and Hungary to halt Russian oil purchases. Canadian Prime Minister Mark Carney called for swift implementation of secondary sanctions, while France emphasized that Europe’s remaining Russian imports are now “very marginal.”
Speculator Positioning (Bearish, Priced In) The latest CFTC data show that as of August 12, money managers reduced their net long in CME’s flagship NYMEX WTI contract to just 48,865 contracts, the smallest bullish position since April 2009. Meanwhile, trades of WTI done on the ICE exchange show money managers holding a net short of about 53,000 contracts. When the two venues are combined, overall positioning in WTI has slipped into net short territory for the first time on record.
Oil/Product Inventories. (Bullish, Priced In) The latest EIA report leaned bearish as well, showing a surprise build in commercial crude inventories of roughly 600 MBbls and a 2.1 MMBbl increase at Cushing, which pushed stocks at the hub to their highest level since early May and pressured prompt-month spreads. Product demand indicators were softer, with total refined product supplied running nearly 2% below the same week last year, and exports slipped to about 3.55 MMBbl/d after several weeks of strength, signaling a weaker pull from international buyers.
OPEC+ Quotas. (Bullish, Priced In) On June 2, OPEC+ announced its extension of 3.66 MMBbl/d cuts through December 2025. Additionally, the 2.2 MMBbl/d voluntary cuts from eight member countries will continue into Q3 2024 but will start to be reversed in October at a rate of 0.18 MMBbl/d per month. OPEC+ members agreed on September 5 to delay a planned gradual 2.2 MMBbl/d supply hike by two months, shifting the start to December. The group will add 0.19 MMBbl/d in December and 0.21 MMBbl/d from January onwards, with an option to adjust or pause these hikes depending on market conditions. The cartel also reaffirmed its compensation cuts of 0.2 MMBbl/d per month through November 2025, as members such as Iraq, Russia, and Kazakhstan have struggled to meet their original production quotas.
AEGIS notes that the global crude market would quickly build inventories without OPEC's support in reducing supply.
OPEC Unwind. (Bearish, Mostly Priced in) OPEC+ announced it will raise the group’s production quota by 137 MBbl/d for October, marking the start of unwinding 1.66 MMBbl/d of voluntary cuts that were originally planned to stay in place through the end of 2026.
China Demand. (Bearish, Priced In) China’s behavior remains the key wild card. Goldman Sachs expects Beijing to continue filling commercial and strategic tanks through 2026, projecting inventory builds of 500 MBbl/d over the next five quarters. Analysts note that without renewed Chinese stockpiling, OECD inventories could swell noticeably as new OPEC+ and non-OPEC supply hits the market.
USD (Bullish, Priced In) The Federal Reserve cut its benchmark interest rate by 25 basis points, the first cut since December 2024, and signaled that another 50 basis point cut could be coming by then end of 2025. If markets expect rate cuts or looser monetary conditions, the dollar tends to weaken. Oil is priced in dollars, so a weaker dollar lowers the “real” cost of oil for buyers using other currencies. This often boosts demand at the margin and supports prices.
Ukraine-Russia Resolution. (Bearish, Surprise) President Trump is pushing for a summit between Vladimir Putin and Volodymyr Zelensky following a series of high-level talks. Vandana Hari of Vanda Insights said crude “may be in for a holding pattern,” noting that while the path to a resolution has opened, it could take time. A peace deal could eventually ease restrictions on Russian crude exports, though Moscow has largely maintained flows throughout the conflict.
Trade War. (Bearish, Mostly Priced In) A federal appeals court ruled that most of President Trump’s global tariffs were illegal, saying he exceeded his authority. The decision adds uncertainty over the tariffs’ future, and while the Trump administration looks to appeal the decision the ruling is set to take effect on October 14 unless overturned, which has raised hopes for stronger economic growth.
Projected Oversupply. (Bearish, Mostly Surprise) According to the EIA, global oil inventories are expected to rise by an average of 1.7 MMBbl/d in 2025, followed by a slightly slower but still significant 1.6 MMBbl/d increase in 2026. The most aggressive builds are forecast for 4Q 2025 and 1Q 2026, when inventories are projected to swell by 2.3 MMBbl/d on average.
Trump/Iran/Venezuela. (Bullish, Surprise) The US government has sent several ships off the coast of Venezuela prompting speculation that the Trump administration may be seeking to push Venezuelan President Nicolas Maduro from power. Tensions rose after the US sent fighter jets to the Carribean after two Venezuelan military aricraft flew over an American naval vessel in the area.
Russian Supply. (Bullish, Surprise) In Europe, Ukraine ramped up its drone strikes on Russian energy infrastructure, with fresh attacks reported on the Afipsky refinery in southern Russia and facilities along the Black Sea coast. Bloomberg reported the strikes have taken more than 7% of Russia’s refining capacity offline, spurring domestic fuel shortages and prompting Moscow to consider curbs on diesel exports. Despite these setbacks, Russian crude exports remained resilient. As volumes were diverted from refineries to export terminals, seaborne shipments climbed to a 16-month high of 3.62 MMBbl/d, underscoring the difficulty of materially curtailing Russian flows even as refinery output falters.
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