WTI crude oil has fallen to its lowest level since May 2023, while Brent crude is at its weakest since November 2021.
The oil market faces challenges as OPEC+ increases production amid concerns over declining oil prices and the potential for a global economic slowdown. This uncertainty is exacerbated by tariff concerns and a risk-averse sentiment in wider markets.
Current Oil Price Trends
Current trends indicate oil prices may drop further, with WTI crude testing its 2023 low. A breach of this support could lead prices to around $60. The actions of OPEC+ appear to contradict the current economic climate, as they remain hopeful for the market despite these challenges.
What we can gather from the content so far is reasonably straightforward. There’s been a notable dip in crude oil prices, with West Texas Intermediate now slipping to a level not seen since May of last year. Brent, the global benchmark, is showing even more weakness, hitting prices last registered more than two years ago. Supply is high, and demand is softer than expected, which together make for a downward pull on price.
This comes at a time when OPEC+, the group of oil-exporting countries, is upping their output. That move, on its own, might seem slightly perplexing given that prices are already under pressure. It suggests they may be counting on a rebound in demand, or perhaps seeing their market share as more important than near-term price stability. Either way, the additional supply isn’t helping to balance sentiment.
We’ve also got wider markets leaning heavily on the cautious side. Tariffs, trade frictions, and generally uncertain economic conditions are pulling risk assets lower. Commodities like oil tend to catch the bow wave from this. So, when money moves out of equities and credit, oil doesn’t tend to hold up on its own; it trades heavy along with everything else.
Market Implications
Given that WTI is pressing on the lows from last year, derivative positions linked to that zone will be worth tracking closely. A clean break below could open the door to the $60 region, which has acted as a base during previous cycles. Markets don’t tend to move in straight lines, though, so stops placed too tightly in that area could be vulnerable to noise before direction asserts itself.
Brent’s weakness comes with its own set of implications. It’s not just the fall in price, it’s that we’re now operating outside the range traders have been working with for years. So many strategies are modelled on seasonal norms or multi-year averages. When those longer-dated inputs become unreliable, positioning gets thinner. We might notice more erratic price movements purely due to the lack of conviction on either side.
From here, it’s less about chasing moves and more about understanding those key technical markers. Spot levels matter right now, particularly where prior ranges meet psychological barriers. Reaction to those zones will tell us whether we’re witnessing a full sentiment shift or just temporary dislocation.
As a group, we should keep a close eye on open interest across contracts expiring through Q3. If it begins concentrating near current strikes on the downside, that could amplify volatility during the roll. This is important because low liquidity and high exposure tend to exaggerate even modest surprises on the macro front.
Also worth noting is the tension between the higher-for-longer interest rate view and the forward demand outlook. If growth expectations start to give way, energy demand estimates for the second half of the year may need to be wound back. That would in turn shift the options skew further to the put side, making downside hedging more expensive but also more urgent.
Volatility may not be picking up yet in outright terms, but it’s lurking in the background through wider trading bands and increased dispersion between settlement prices and intraday ranges. We should approach position sizing accordingly and revisit margin tolerance.
Let futures structure lead where outlooks feel hazy. Watch for carry changes—especially backwardation flattening—which would hint at less tightness in nearby supply. If those curves start to trade flat or slip into contango, the market’s telling us that urgency to secure physical barrels is fading. And when that disappears, so does the short-term case for upside.
No need to second-guess policy decisions or long-term economics. Let the tape do most of the work. But it’s a period that needs clear price levels, careful leverage, and swift reaction if certain zones break.
