Oil News: Will OPEC Production Surge Sink Crude Oil Futures This Week?

Light Crude Futures Slip as Geopolitical Risk Premiums Fade

Light crude oil futures settled at $66.50 on July 4, 2025, down 0.75% for the week, as easing Middle East tensions, weak demand signals, and inventory builds weighed on trader sentiment ahead of the July 4 holiday close.

Traders had been watching OPEC+ closely, expecting additional supply, but the group’s larger-than-expected hike announced over the weekend was not yet reflected in last week’s price action.

Middle East De-escalation Strips Risk Premium from Crude Oil News Today

Geopolitical risk premiums that had previously lifted crude above $80 were erased as Iran reaffirmed its nuclear commitments, and an Israel-Iran ceasefire ended a 12-day conflict.

Plans for renewed U.S.-Iran talks and meetings between Saudi and U.S. officials further reduced fears of immediate supply disruptions. With conflict risks sidelined, traders refocused on structural supply-demand factors in setting near-term positioning.

Demand Concerns Weigh on Oil Prices Forecast

Demand signals disappointed, reinforcing bearish sentiment last week. China’s factory activity contracted for a third consecutive month, while its services sector growth slowed to a nine-month low, reflecting weaker domestic demand and export challenges. Although Chinese refiners sought additional term barrels for August and September, the overall Asian demand outlook remained soft.

In the U.S., crude inventories rose unexpectedly by 3.8 million barrels to 419 million, defying forecasts for a draw during peak driving season. Gasoline demand fell to 8.6 million barrels per day, below seasonal norms, raising concerns about domestic energy consumption and refined product demand.

Trade Policy Uncertainty Pressures Oil Prices Projections

Trade concerns continued to pressure market sentiment as the July 9 tariff deadline approaches, with potential 20-30% U.S. tariffs threatening global economic growth and, by extension, oil demand.

A preliminary U.S.-Vietnam trade deal offered temporary optimism but did little to offset broader uncertainty weighing on risk appetite across energy markets.

OPEC+ Production Surprise Sets Stage for Bearish Outlook

While traders expected an OPEC+ supply increase, the group exceeded expectations with a 548,000 bpd production hike announced on July 5, set to begin in August.

The cartel, led by Saudi Arabia, signaled a shift toward defending market share aggressively, leveraging its low production costs to pressure higher-cost producers and enforce discipline on non-compliant members.

Although this supply news did not impact last week’s price action, it is likely to weigh on crude prices in the coming week, adding to the bearish mix of weak demand and fading geopolitical premiums.

Market Forecast: Bearish Bias into Next Week

With structural oversupply set to increase, demand signals soft, and risk premiums removed, traders should prepare for continued downside risk in crude futures next week, with potential tests of the low $60’s if demand indicators do not improve.

Technically, the direction this week will be determined by trader reaction to the long-term 50% level at $67.44 and the 52-week moving average at $65.75. Look for a bearish tone to develop under $65.75 and a bullish move on a sustained move over $67.44.

More Information in our Economic Calendar.