During a recent Joint Ministerial Monitoring Committee (JMMC) meeting of OPEC+, the focus was on improving compliance with current production targets. Countries are required to submit plans for production cuts by 15 April, but there was no discussion on the substantial production increase scheduled for May.
The next regular OPEC+ meeting is on 28 May. Should OPEC+ proceed with the planned increase of 411,000 barrels per day, the oil market may experience a notable oversupply, likely exerting downward pressure on oil prices.
Emphasis on Compliance
The JMMC’s emphasis on reinforcing adherence to previously agreed supply levels points to internal disparities in meeting voluntary output reductions. With some member states lagging behind quotas, the request for written production adjustment plans by mid-April seems aimed at reinforcing discipline across the group. However, market participants should note the conspicuous silence surrounding the previously announced increase of over 400,000 barrels per day beginning in May.
The absence of open debate on this planned output expansion raises questions about cohesion within the group. It suggests either an implicit commitment to honour the previously planned increase or, alternatively, ongoing behind-the-scenes negotiations that are yet to be formally acknowledged. Either way, pricing risk is skewed toward a weaker demand-supply balance as we move into the warmer months, when consumption patterns often soften outside of transport and cooling cycles.
If the group does proceed with the additional barrels in May without a corresponding shift in demand forecasts, especially from large consumers like China, the surplus could become evident quickly. Stockpiles, particularly OECD commercial inventories, may begin to build again, which historically puts futures curves under pressure and flattens backwardation. This dynamic can reprice term structures markedly, especially in shorter horizon contracts.
Monitoring Refining Margins
We’re also keeping a close eye on refining margins, which are showing early signs of contraction after months of robust run rates. Should this trend persist, downstream demand for crude could wane further, exacerbating any supply/demand mismatch. In our view, traders relying on calendar spreads should closely monitor these shifts, not only in OPEC+ actions but also in product storage trends, particularly across Asia and Europe.
Volatility may be underscored further as the 28 May meeting approaches. Should guidance remain vague or markets interpret messaging as disjointed, we could see risk premiums erode. That would be especially true if speculative positioning—currently elevated in Brent and WTI—begins to unwind. There is little precedent for OPEC+ walking back publicly flagged supply increases without advance signals, so lack of commentary at this stage implies it’s still on the table.
In the absence of sustained geopolitical disruptions or demand upside surprises, a return to a more balanced or even oversupplied market looks increasingly probable. For those active in oil derivatives, this implies that downside setups, especially through put structures or short exposure to summer-dated contracts, could offer more attractive risk-adjusted value. Keep an eye on refinery maintenance schedules and any pull-forward demand from strategic reserves, which could temporarily cloud actual consumption signals.
