Oil prices are falling, with NYMEX WTI dropping over 4% to around $58.5/bbl. The decline is driven by projected global oil surplus and a bearish API inventory report. West Texas Intermediate’s time-spread shifted to contango, indicating oversupply concerns, according to commodity experts.
OPEC maintains global oil demand growth forecasts at 1.3m b/d for this year and 1.4m b/d for 2026. Supply from non-OPEC+ producers is expected to rise by 920k b/d in 2025 and 630k b/d in 2026, spurred by increased output in the US, Canada, Brazil, and Argentina. OPEC revised its global oil market balance expectations to a slight surplus in 2026.
Opec Production and Inventory Reports
OPEC’s production in October increased modestly by 33k b/d to 28.5m b/d, short of the planned increase by 450k b/d. Production increases from Saudi Arabia, Kuwait, Iraq, and Nigeria were offset by declines in Iran and Libya. API reported a 1.3m barrel increase in US crude inventories, while Cushing stocks fell by 43k barrels.
The EIA raised US crude oil production estimates to 13.59m b/d for 2025 and 13.58m b/d for 2026. Conversely, US petroleum consumption is projected to remain steady at around 20.5m b/d this year and in 2026.
We are seeing WTI crude prices fall below $60/bbl due to clear signs of a supply glut, a move that signals more weakness ahead. Yesterday’s 4% drop, confirmed by rising US inventories and bearish OPEC forecasts, indicates that the immediate market pressure is to the downside. This environment requires us to position for either a further price decline or a period of sustained low prices.
Market Strategies and Future Outlook
The shift in the WTI futures curve to contango is a critical signal of physical oversupply that we cannot ignore. This structure, where near-term prices are cheaper than future prices, has historically preceded further price weakness, as we observed briefly in early 2023. We should consider trades that profit from a widening contango, such as selling the December 2025 contract while buying the June 2026 contract.
With the EIA confirming US production will average nearly 13.6 million b/d in 2025, the supply pressure is relentless. This sustained output from non-OPEC producers is creating a market dynamic similar to the 2014-2016 period, which ultimately saw prices fall below $30/bbl. The market is currently oversupplied by an estimated 500,000 barrels per day, a surplus that is expected to grow into 2026.
Given the potential for further declines, buying put options on WTI with a strike price around $55 or $50 offers a defined-risk way to capitalize on this bearish momentum. Implied volatility has increased to a three-month high of 34% but could climb higher if we break key support levels, making long-option strategies attractive. Selling out-of-the-money call credit spreads would be another way to generate income while maintaining a bearish to neutral outlook.
The supply glut is being amplified by a soft demand picture, with US petroleum consumption expected to remain flat. Recent manufacturing PMI data released last week from the Eurozone showed a deeper-than-expected contraction, reducing forecasts for fuel demand heading into the winter. This combination of rising supply and stagnant global demand reinforces the bearish case for oil in the coming weeks.
