Pump Now, Pay Later
The bears pushing
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In this report: OPEC+’s 2.5 mbpd supply hike since March keeps pressure on prices, with India’s demand softening and Russian flows to Asia shrinking. U.S. shale drills less at multi-decade-low rig counts despite record output. WTI prompt spreads sell off, front month remains ~$2 above Jan 2026, and traders eye seasonal spread spikes ahead.
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My concept last week was bang wrong. I was looking for any sign that the market had perhaps priced in the OPEC+ hike, to then look for a long-whereby sellers would get lifted. Yes, the narrative was incredibly bearish-the dog on the street knew that- and as I mentioned in that report, we would find out pretty fast if there was any sign of a fade or not. The week proceeded to price negative and weak. Net -net, the front spread also collapsed back to likely targets of QVWAP.
Oil prices are sliding as OPEC+’s 2.5 mbps supply hike since March outweighs pockets of tightness. U.S. output remains near historic highs, though drillers are cutting rigs and shelving 2026 investment. India-one of the last pockets of transportation demand strength, but driven mainly by petrochemical feedstock appetite similar to China’s- is starting to wane. Seaborne imports fell 0.2 mbpd mom to 4.4 mbpd in July, with inventories averaging 127 mb in the past three months-a 5% yoy drop - as Russian arrivals slid 20% yoy to 1.4 mbpd. Further weakness is likely from discharge issues at the sanctioned Vadinar Refinery and potential state refiner cutbacks under U.S. tariff pressure. WTI’s prompt curve remains in backwardation, with front-month prices ~$2 above Jan 2026.
U.S Shale producers are loosing money at these prices.
Articles
Shale CEO Says Oil Markets Are in for Bearish Crude-Supply Flood
Why the oil market is tight despite big OPEC+ output hikes
Trump Moves to Kill $7B Solar Program for Low-Income Homes
The Bullish Case for Oil Is Real — But Far, Far Away
Macro
The OPEC+ bark is louder than their bite. There is a shortfall, but really, its not by a market changing amount. OPEC+ will continue to raise production as long as The U.S target Russian exports. The price war serves two masters 1. Flood the market, take down prices and squeeze U.S shale producers out of the game-thus driving health M&A activity in North America. 2. Budget income for the member states. They simply need to make cash while the oil sun shines. And the flashing headline in oil land is that demand is on the way south. So get it out of the ground while you can, make cash today.
Personally, I think this strategically is not playing the ultra long game, where it oil in 20 years time will be at much higher prices, due to curbed investment and reinvestment levels. It will simply cost a lot more in 20 years to produce and demand, while much lower, will still be there enough to spur this expensive production. However, the OPEC game being played is to produce now, make money today and worry about the longer picture when that comes. The economics will work itself out.
Read on for China stocks and trade.
