About
Support
Log in
Hong Kong S.A.R
14crudeM

Crude climbs as market digests OPEC hike and shale slowdown risks

Commodities
Picture of Ole Hansen
Ole Hansen

Head of Commodity Strategy

This content is marketing material

Key points:

  • OPEC+ raises output again: Saudi-led supply boost aims to enforce compliance and pressure high-cost rivals

  • U.S. shale feels the pinch: Sub-$60 WTI threatens profitability, with top producers cutting spending and signs that production growth is stalling.

  • Compliance and sanctions in focus: Overproduction by Iraq, Kazakhstan, and UAE, plus rising Iranian and Venezuelan output remains a challenge for OPEC+

  • Associated gas at risk: Lower shale output could drag down U.S. natural gas supply, just as global demand for cleaner energy sources rises.

Crude prices climb for a second consecutive day, fully reversing Monday’s sharp decline, which was triggered by an OPEC+ announcement to increase supply more aggressively than expected for a second straight month. The move, largely driven by Saudi Arabia, appears to be a calculated response to persistent non-compliance within the group—particularly from Kazakhstan—and also aligns with former President Trump’s push for lower oil prices. Over time, OPEC could benefit from this strategy through increased market share, as sustained low prices may challenge the economic viability of higher-cost producers.

Part of the rebound in crude prices stems from the fact that last week's market already priced in the likelihood of another production hike. This occurred even as broader risk sentiment improved amid growing optimism around U.S.-China trade negotiations. As seen in the WTI crude chart, the most recent selloff halted just above the early April “Liberation Day” low of USD 55 per barrel. Strong technical resistance remains in place ten dollars higher at USD 65 per barrel.

While the supply increase was somewhat anticipated, prices have found support in concerns that higher-cost producers may struggle to sustain output—particularly in the U.S., where WTI has fallen below USD 60 per barrel. This level is often cited as a profitability threshold; below it, further production expansion becomes economically unviable. However, with Saudi Arabia signaling openness to adding even more supply, any sustained upward momentum in prices could be limited. Additional pressure comes from the uncertain demand outlook, especially if U.S.-China trade tensions escalate, threatening consumption in the world’s two largest energy markets.

 

9olh_oil3
WTI Crude Oil, first month cont. - Source: Saxo

OPEC+ supply strategy and compliance issues

With the latest planned addition of 411,000 barrels per day (b/d) in June, the OPEC+ alliance will already have unwound more than 40% of the 2.2 million b/d in production cuts implemented between 2022 and August 2023. However, the group’s credibility has been undermined by widespread quota violations. Recent compliance data suggests cumulative overproduction of around 800,000 b/d, with Iraq, Kazakhstan, and the UAE cited as the main culprits.

Complicating the picture further, Iran and Venezuela—both under U.S. sanctions and exempt from OPEC+ quotas—have collectively increased their output by over 1 million b/d since September 2022. If the U.S., under renewed focus from President Trump, manages to enforce stricter sanctions on these two nations and if compliance within OPEC+ improves, the actual net increase in global supply could be far smaller than market fears suggest. Combined with a potential output decline from high-cost producers, this scenario could help rebalance the market more quickly than expected.

9olh_oil2
OPEC production with baselines

U.S. production plateau and associated gas risks

U.S. oil production growth is showing signs of fatigue. Two major shale operators have announced spending cuts in response to the price downturn, raising concerns that American output may have already peaked. Sub-$60 WTI prices put many shale operations at risk of becoming unprofitable, threatening future investment, production, and ultimately, market share—particularly to lower-cost OPEC+ producers.

Annualized U.S. oil production growth has slowed to 2.8%, with shale oil—the source of roughly three-quarters of total U.S. output—growing at less than 2%. If WTI prices remain below USD 60 for an extended period, a production rollover becomes increasingly likely, opening the door for rival producers to fill the gap.

It's also important to consider the knock-on effect on natural gas. More than one-third of total U.S. natural gas production comes from associated gas—a byproduct of crude oil extraction—especially from major shale plays like the Permian Basin in Texas and southeastern New Mexico. A downturn in oil output from these fields would likely lead to a decline in associated gas production as well. This comes at a time when demand for natural gas is expected to rise substantially, both in the U.S. and globally, as utilities shift toward cleaner power generation sources.

9olh_oil1
US crude oil annualised production change
9olh_oil4
WTI Crude Oil: Five-year historical charts provided for compliance purposes. Source: Saxo

Recent commodity articles:

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
8 April 2025: Golds deleveraging pullback fails to shake supportive outlook
8 April 2025: Golds deleveraging pullback fails to shake supportive outlook
7 April 2025: COT on Forex and Commodities - April 7 2025
4 April 2025: Commodities weekly Tariff-led recession pain triggers sharp reversal
3 April 2025: Tariff-related recession fears ignite widespread commodities selloff
2 April 2025: Commodity Outlook: Commodities rally despite global uncertainty
31 Mch 2025: COT Report: Ongoing USD selling amid mixed week for commodities
26 Mch 2025: Commodities show strength in Q1, led by a select few
25 Mch 2025: Crude oil Sanctions threat counters tariff-driven demand worries
24 Mch 2025: COT on Forex and Commodities - 24 March 2025
21 Mch 2025: Commodities weekly: High-flying precious metal sees profit taking
19 Mch 2025: Has the gold express already left the station?
17 Mch 2025: COT Report: Silver and copper stands out in week of energy weakness
14 Mch 2025: Gold surges past USD 3,000 as haven demand grows
12 Mch 2025: Tariffs and the energy transition: Key drivers of copper demand
11 Mch 2025: Gold holds steady despite deleveraging risks in volatile markets
10 Mch 2025: COT Report: Wholesale reductions in speculators' USD and commodity longs
7 Mch 2025: Commodities Weekly: Tariffs, trade tensions, fiscal bazooka, and Ukraine
5 Mch 2025: Tariff threat disconnects HG copper from global market
4 Mch 2025: Stagflation and geopolitical tensions fuel renewed demand for gold
3 Mch 2025: COT Report: Broad retreat sees WTI longs slump to 15-year low


Podcasts that include commodities focus:

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
25 Mch 2025: Did Trump just blink?
18 Mch 2025: US market found support, but how durable will it be?
14 Mch 2025: Is silver set to shoot the lights out?
10 Mch 2025: US un-exceptionalism is the theme
7 Mch 2025: US bear market risks ratchet higher. EUR train has left the station
4 March 2025: Are we on the verge of a big whoosh?

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

    Read full article
  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

    Read full article
  • 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, ...
    Read full article
  • 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

    Read full article
  • 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

    Read full article
  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

    Read full article
  • 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

    Read full article
  • 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

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

    Quarterly Outlook

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

    John J. Hardy

    Global Head of Macro Strategy

    Read full article
  • 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

    Read full article
Disclaimer

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.


Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R
Products & pricing
Asset Management
Platforms
Accounts & service
General
Other
Legal

Losses can exceed deposits on margin products. Please ensure you understand the risks.

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-hk/about-us/awards.

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.