220519 OilPorducM

Crude oil holds firm despite mounting supply glut fears

Picture of Ole Hansen
Ole Hansen

Head of Commodity Strategy

This content is marketing material

Key points:

 

  • WTI and Brent crude oil continue to trade within a relatively wide USD 10 range, established after the sharp selloff in early April.
  • A rapid roll back of voluntary production cuts from eight OPEC+ members is so far being offset by several short- and medium-term supply-side issues
  • Tariff-related growth and demand worries combined with rising OPEC production has in recent weeks helped attract increased short-selling interest, which is now being reduced, thereby adding support. 
  • Overall, we see limited upside potentials amid ongoing concerns about a supply glut and softening demand growth


WTI and Brent crude oil continue to trade within a relatively wide $10 range, established after the sharp selloff in early April. This slump followed renewed concerns over President Trump’s trade war policies and an OPEC+ announcement to accelerate the unwinding of 2.2 million barrels per day (bpd) in voluntary production cuts. The move, seen as a response to overproduction by some members, was also aimed at gradually regaining market share from high-cost producers.


Since then, eight OPEC+ members have agreed to incrementally increase output at a pace of 410,000 bpd per month through at least July. This strategy has raised concerns about a potential supply glut, especially as global stockpiles begin to build. However, prices have remained relatively resilient amid uncertainty over the broader economic impact of Trump-era trade tensions and their effect on global demand for fossil fuel-based products.

On the demand side, rising consumption of gasoline and distillates ahead of the peak summer season for driving and air conditioning has helped underpin the market. Meanwhile, several supply-side risks are offering additional short- to medium-term price support. These include recent wildfires in Canada threatening production, the possibility of supply disruptions in Libya due to political unrest, and the recent revocation of Chevron’s license to operate in Venezuela—potentially impacting around 220,000 bpd of output. Additionally, persistent geopolitical tensions, including the Russia-Ukraine war and the looming threat of renewed U.S. sanctions on Iran if nuclear talks break down, are keeping a firm floor under oil prices.

Brent crude, currently trading around USD 65.50, remains confined within a broad USD 58.50 to USD 68.50 range. In addition to the short-term supply risks previously mentioned, the recent price uptick has also been driven by buying activity from speculators who were caught off guard by the market’s resilience—more on that below. However, once this momentum-driven buying exhausts itself, further upside is likely to remain capped, particularly as OPEC+ continues to add supply incrementally on a monthly basis.

 

4olh_oil1
Brent crude oil, first month cont. - Source: SaxoTraderGO

The US-focused WTI crude contract, meanwhile, is trading approximately USD 1.50 below the upper end of its current USD 55 to USD 65 range. It remains supported by strong refinery demand, low inventory levels, and the disruption to Canadian production caused by ongoing wildfires. Market expectations for another weekly drawdown in U.S. crude stockpiles are also lending support. A notable factor is the situation at Cushing, Oklahoma—the delivery point for CME WTI futures—where inventories have dropped to a ten-year seasonal low of 23.5 million barrels, compared to a ten-year average of 35.1 million barrels. This tightness is helping to sustain elevated time spreads at the front end of the futures curve, reflecting robust near-term demand.

4olh_oil2
WTI crude oil futures, first month cont. - Source: SaxoTraderGO

Despite these supportive factors, the broader macroeconomic outlook remains clouded. Uncertainty fueled by President Trump’s shifting stance on tariffs has intensified fears of a global economic slowdown, leading to increased short-selling activity. Some of this bearish positioning has come from macro-focused hedge funds using oil as a proxy hedge against weakening global growth.

According to the latest CFTC Commitment of Traders report, speculative short interest peaked during the week ending May 27, when managed money accounts held a gross short position of 257,000 contracts across the three major Brent and WTI crude contracts. This equates to more than 250 million barrels and marks the highest level in eight months—a level only briefly exceeded five times since 2020. Overall, as illustrated in the chart below, the net speculative position remains relatively muted at 226,000 contracts relative to a five-year average at 420,000 contracts, suggesting balanced sentiment.

However, total open interest—the combined sum of long and short positions—remains near a three-year high. This elevated activity from hedgers, swap dealers, and speculators highlights a high degree of market participation despite the ongoing rangebound price action, underscoring the broader uncertainty surrounding the near-term direction of the oil market.

4olh_oil3
Managed money positions and open interest
Related articles/content             

3 June 2025: Gold and silver break key levels as copper eyes tariff decision
2 June 2025: COT Report: Speculators sold crude ahead of OPEC hike
28 May 2025: Breakout or breakdown Gold silver and platinum face pivotal resistance zones
26 May 2025: COT Report: Hedge funds return to gold; elevated grains short
23 May 2025: Commodities weekly Diverging supply trends boost platinum weigh on crude
21 May 2025: Israel attack risks add modest risk premium to crude prices
20 May 2025: As gold pauses is platinum ready to shine for investors
19 May 2025: COT Report: Speculators show measured reaction to trade truce
16 May 2025: Commodities Weekly - Gold retreats Procyclicals rise amid trade truce optimism
14 May 2025: Crude stays range-bound despite latest tariff-truce bounce

13 May 2025: Gold holds steady as tariff truce sparks silver rebound
12 May 2025: COT Report: Broad risk reduction seen ahead of easing trade tensions
9 May 2025: Commodities weekly Sentiment improves as trade tensions cool before talks
8 May 2025: Copper market navigates tariff uncertainty amid tight global supply
7 May 2025: Agriculture markets diverge as trade war weather and speculators reshape landscape
6 May 2025: Crude climbs as market digests OPEC hike and shale slowdown risks

6 May 2025: Gold rises as Chinese demand rebounds post-holiday
5 May 2025: 
COT Report: Dollar-selling persists; Crude length trimmed ahead of OPEC output hike
1 May 2025: 
Gold corrects sharply from record highs as Chinese demand pauses
29 April 2025: 
Copper navigates energy transition supply shocks and market turmoil
28 April 2025: 
COT Report: Continued gold selling; USD weakness drives record JPY long
25 April 2025: 
Commodities weekly Energy slump overshadows strength in gold and agriculture
23 April 2025: 
Blowout top leaves Gold in consolidation mode
22 April 2025: 
Commodities return Why allocation matters
16 April 2025: Whats next as gold hits our USD 3300 target
15 April 2025: 
COT Reports show hedge funds racing to cash post-Liberation Day
11 April 2025: 
Commodities weekly As chaos reigns whats next for markets
10 April 2025: 
YouTube Interview: Gold, silver, copper, oil - prices, supply, demand in 2025


Podcasts that include commodities focus:


28 May 2025: Nvidia to determine whether US stocks can achieve new highs
12 May 2025: As good as it gets on the trade news front
6 May 2025: 
Bears hang in at key levels as Palantir rides the retail whirlwind
23 April 2025: 
Trump going soft on tariffs versus the direction of travel.
11 April 2025: 
US and China are slipping into an economic war
4 April 2025: 
Markets melts down as recession risks go global
1 April 2025: 
Bracing for Liberation Day
More from the author             

Quarterly Outlook

01 /

  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

None of the information provided on this website constitutes an offer, solicitation, or endorsement to buy or sell any financial instrument, nor is it financial, investment, or trading advice. Saxo Capital Markets UK Ltd. (Saxo) and the Saxo Bank Group provides execution-only services, with all trades and investments based on self-directed decisions. Analysis, research, and educational content is for informational purposes only and should not be considered advice nor a recommendation. Access and use of this website is subject to: (i) the Terms of Use; (ii) the full Disclaimer; (iii) the Risk Warning; and (iv) any other notice or terms applying to Saxo’s news and research.

Saxo’s content may reflect the personal views of the author, which are subject to change without notice. Mentions of specific financial products are for illustrative purposes only and may serve to clarify financial literacy topics. Content classified as investment research is marketing material and does not meet legal requirements for independent research.

Before making any investment decisions, you should assess your own financial situation, needs, and objectives, and consider seeking independent professional advice. Saxo does not guarantee the accuracy or completeness of any information provided and assumes no liability for any errors, omissions, losses, or damages resulting from the use of this information.

Please refer to our full disclaimer for more details.

Saxo
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992