Oil Prices Face Downside Risk as OPEC+ Output Surges and Indian Demand Softens

Crude Oil Market Overview

Oil prices enter the week under sustained downward pressure as rising supply outweighs pockets of tightness. OPEC+ has been adding barrels at the fastest pace in years, and the balance between production growth and moderating demand is tilting bearish.

OPEC+ Boosts Output at Fastest Pace in Three Years

Since March, OPEC+ has increased output by roughly 2.5 million barrels per day (mbpd), marking the first sustained production expansion in three years. Saudi Arabia has delivered most of the actual increase, while others -including Iraq, Russia, and Kazakhstan- have struggled with capacity limits or are constrained by overproduction penalties.

Two forces are driving this push:

1. Market share defence: squeezing higher-cost producers like U.S. shale.
2. Revenue needs: monetizing national reserves now while prices remain viable.

On the U.S. side, output remains near record highs, but drilling activity is falling. Rig counts have dropped to multi-decade lows, and major players like Diamondback Energy are cutting capital budgets to avoid oversupplying into weakening prices.

India, long a pocket of demand strength, is showing signs of softening. July seaborne imports fell 0.2 mbpd month-on-month to 4.4 mbpd, while onshore inventories averaged 127 million barrels over the past three months-down 5% year-on-year. Russian crude arrivals dropped to 1.4 mbpd, a 20% decline. Seasonal factors play a role, but discharge delays at the sanctioned Vadinar Refinery and potential cutbacks under U.S. tariff pressure could push imports lower.

Oil Market Structure Shows Cracks Despite Backwardation

WTI’s forward curve remains in backwardation, with front-month prices about $2 above January 2026 delivery. Near-term support comes from Middle East summer power demand and steady Chinese stock building.

Spreads, however, have softened. The September/October prompt spread fell $0.84 last week, as September prices declined faster than October. Some longer-dated spreads – such as November/April – historically strengthen at this time of year, but only if demand holds steady.

Chart: WTI Prompt front spread Sept/Oct. Source: TradingView

Macro Headwinds Weigh on Global Oil Demand

The broader macro backdrop leans bearish. Transport demand growth is slowing, petrochemical feedstock consumption in Asia is plateauing, and OECD crude stocks remain low but stable. U.S. diplomatic pressure on Indian refiners to reduce sanctioned Russian purchases adds another layer of uncertainty to trade flows.

Cross-asset risk is also in play. A sharp equity sell-off – as seen after the last U.S. jobs report (NFP)- can spill over into oil, amplifying downside momentum.

Technical Outlook: WTI at Risk of Deeper Pullback

From a technical perspective, last week’s rejection of quarterly VWAP on front-month WTI leaves the market vulnerable to further losses. A retracement toward $65.60– a key volume area and broken uptrend support-could present a tactical short opportunity if no bullish supply shocks emerge.

CHART: WTI Daily bar. Yearly VWAP.

If the downtrend extends, the $59.60 quarterly value area low is a logical zone for tactical longs, particularly if seasonal spread patterns start to firm.

Bottom line: The market faces rising OPEC+ supply, weakening demand from key consumers like India, and a curve structure that hides cracks in the near-term balance. This week, watch Indian imports, U.S. shale activity, and whether OPEC+ exports finally align with their announced targets. Geopolitical headlines can still turn the tide quickly, but for now, the bias remains to the downside.