Oil's Silent Rally: Why the Bears Are Wrong on OPEC's Hikes

The oil market is a warzone of dueling narratives right now. On one side, bears are howling about oversupply, citing OPEC+'s relentless output hikes and StanChart's "balanced market" forecast. On the other, bulls see a ticking time bomb of underappreciated risks—fromPermian Basin declines to OPEC+'s operational chaos—that could ignite a Q4 price explosion. Here's why the bears are setting themselves up for a fall—and why you should buy oil now before the rally begins.

OPEC's “Acceleration” Isn't All It's Cracked Up to Be

Let's start with the headline: OPEC+ has now executed three straight months of 411,000 bpd output hikes, aiming to fully unwind their 2.2 million bpd cuts by October. The bears are right to point out this adds 1.37 million bpd to global supply by July alone. But here's the catch: not all barrels are created equal.

First, non-compliance is rampant. Iraq and Kazakhstan have been overproducing since 2023, and OPEC+'s “compensation” rules (where they must cut later to make up for overages) are toothless. The UAE's energy minister warned about this in May, but enforcement remains a joke. Second, Permian Basin output is stalling, with U.S. liquids growth collapsing to just 367,000 bpd in 2025—down from 585,000 in 2024.

Combine this with operational underperformance from aging OPEC fields (Saudi Arabia's “cheap” oil may not be so cheap to extract anymore) and you've got a supply picture that's far less “balanced” than StanChart claims.

Demand Data: Weakness ≠ Collapse

Bear arguments often cite declining gasoline and jet fuel demand—U.S. gasoline demand is down 2% year-over-year, while jet fuel demand growth has stalled. But this misses two critical points:

1. Q3 is a seasonal battleground. Oil demand typically peaks in August (StanChart's 105.6 mb/d estimate isn't fantasy), and refinery maintenance in Q4 could tighten inventories.
2. Geopolitical trade shifts matter. Trump's tariffs on GCC oil imports may redirect barrels to Asia, but they won't erase demand. Meanwhile, China's muted manufacturing data is priced in—its energy use is still growing, just slower.

The Contrarian Edge: Permian Declines and OPEC's Paper Supply

Here's where the bears get it wrong: they're assuming OPEC+ can actually deliver all those promised barrels. But Permian Basin operators like Diamondback Energy are already warning of constrained drilling budgets, and U.S. shale's golden age is over.

Meanwhile, OPEC's “2.2 million bpd” is a theoretical number. Kazakhstan's fields are aging, Russia's sanctions-hit exports are volatile, and Saudi Arabia's “spare capacity” is now just 100,000 bpd—a rounding error. If even half of those promised barrels fail to materialize, we're staring at a 500,000 bpd deficit by October—not a “balanced market.”

StanChart's Forecast? A Mirage

StanChart's $61/bbl 2025 forecast assumes non-OPEC+ supply grows by 1.8 million bpd, but reality is diverging fast. U.S. growth is halved, Canadian wildfires and Nigerian sabotage are eating barrels, and Brazil's FPSO delays mean its 2025 targets are fantasy. Their “Q3 deficit” could easily turn into a surprise shortage, sending prices north of $80 by November.

Action Plan: Buy Oil Now—Before the Rebalance

The contrarian play is clear: long oil exposure ahead of Q4's crunch. Here's how to play it:

1. ETFs for the masses: Buy XOP (Oil & Gas Explorers) or USL (Short-Term Oil Futures). These track Permian producers and capture the price upside.
2. For the bold: Go long on OPEC+ underperformers like KAZ (Kazakhstan Energy) or ROS (Rosneft). Their shares are dirt-cheap, and a supply shock would rocket their valuations.
3. Avoid the shorts: If you're in oil stocks or futures, do not sell before October—the bears' “oversupply” narrative is a trap.

Final Warning: The Rally Will Surprise You

The market is pricing in 2.2 million bpd of new OPEC+ supply, but the reality will be closer to 1.5 million. AddPermian's decline, Russian sanctions, and China's slow-but-steady demand, and you've got a Q4 squeeze that could hit $90/bbl.

Act now—before the bears realize they're holding paper barrels.

Disclosure: This is not financial advice. Consult your advisor before making investments.