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Brent crude oil prices have reached $75 per barrel for the first time since late February. The rise followed US President Trump’s threatened tariffs on Russian oil, though the initial market response was limited.
OPEC+ countries will begin reversing voluntary production cuts today, increasing supply by nearly 140,000 barrels per day. Compensatory production cuts may also be made to counter previous overproduction, although there are doubts about adherence to these cuts based on past experiences.
Concerns About Demand Outlook
Concerns regarding demand may resurface due to the tariff announcements, and oil prices could potentially decline in the coming days.
Brent’s return to $75 marks a two-month high, triggered in part by tariff threats from Washington aimed at Moscow’s energy exports. However, the market reacted with restraint at first, suggesting that pricing tensions may remain cautious rather than abrupt.
Adding to the complexity, supply is projected to grow at a moderate pace. The scheduled easing of voluntary cuts by the coalition of exporting nations will bring an additional 140,000 barrels per day to market. This increase, while not overwhelming, creates a fresh pressure point. Some members have flagged the possibility of trimbacks to balance prior non-compliance, but history paints a less-than-reliable picture here. Past commitments have often been uneven, and scepticism towards actual implementation is not unfounded.
At the same time, the tariff coverage introduced last week reopens uncertainty around global oil demand. The heavier hand of government policy—particularly from Western producers—tends to shift market expectations quickly. If buyers anticipate a shortfall in mobility or industrial orders due to tightened trade conditions, prices could retreat. That’s particularly relevant with these high levels, which may no longer be fully supported by underlying consumption.
Volatility In Options Markets
For us in options markets, volatility cues must be re-evaluated. Premiums may begin to reflect a rising probability of price mobility in both directions—upside prompted by speculative buying or short-term dislocation, downward movement linked to fresh policy risk and increased supply pressure. Contracts near the money may see a contraction in implied vol if directional confidence fails to materialise in the next sessions.
Looking at calendar spreads, wider positions tied to rolling front-months against later quarters could catch wind if the forward curve reacts to this modest near-term rise with backwardation. But a steepening isn’t guaranteed. Supply-side additions and doubts about global consumer capability argue against aggressive bets there.
CFTC data should be reviewed closely later this week. If managed money is found trimming long positions following this week’s price lift, particularly in Brent, we might be seeing the early stage of a turn in positioning sentiment. That in itself could pull back some favourable delta skew on the call side, especially in weekly or two-week maturities.
As a desk, we should remain alert to abrupt changes in producer hedging and potential shifting behaviour among crude importers, especially in Asia. Tail strategies may once again prove to be the better coverage tool rather than narrow straddle structures. Both direction and conviction are in flux.
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