OPEC+'s Tightrope Act: Why WTI Crude Will Surge in Q3 2025

The Setup: OPEC+ Holds Firm, But Risks Are Brewing
OPEC+ has announced it will maintain its formal production quotas until the end of 2026, reaffirming the 2 million barrels per day (bpd) cut agreed in December 2024. However, the real action lies with the eight-member subgroup—including Russia and Saudi Arabia—that has voluntarily slashed an additional 1.66 million bpd. These cuts, combined with compliance challenges from key members like Kazakhstan and Iraq, are creating a supply-strained backdrop for crude prices.

The July 31 OPEC+ meeting looms large. Analysts expect the group to approve another 411,000 bpd increase to July production, mirroring May and June's hikes. Yet this is not a free pass for bears: even if the July boost goes through, total voluntary cuts will remain at 1.25 million bpd by year-end—far from the full unwinding of the 2023-2024 reductions. With non-compliance rampant, actual supply may fall short of quotas, keeping the market tighter than headlines suggest.

Three Reasons to Bet on WTI Now

1. The Compliance Crisis Is Underestimated
2. Kazakhstan's cheating: The country has repeatedly exceeded its quota by ~100,000 bpd.
3. Iraq's defiance: Baghdad's southern oil exports hit a 3-year high in May, ignoring its 4.6 million bpd ceiling.
4. Russia's dilemma: While Moscow claims adherence, independent analysts estimate a 300,000 bpd overproduction in Q1 2025.

These violations mean the effective supply cushion is smaller than OPEC+ admits. Even if voluntary cuts are partially unwound, the cartel's inability to enforce compliance could keep global inventories below 2024 levels, a key bullish signal.

1. North American Supply Shocks Add Fuel to the Fire
   Canadian wildfires have already disrupted 300,000 bpd of oil sands production. While some output is returning, the long-term damage to pipelines and infrastructure could limit recovery to 80% of pre-fire levels by Q4. Meanwhile, U.S. shale growth is stalling: the EIA forecasts just 300,000 bpd of incremental U.S. production in 2025, down from 1 million bpd in 2024.

1. Seasonal Demand Meets Structural Scarcity
2. Summer travel: Global jet fuel demand is set to rise 2.5% YoY in Q3, with U.S. gasoline consumption hitting 9.5 million bpd during peak driving weeks.
3. Natural gas prices: The Henry Hub spot price is projected to average $4.20/MMBtu in Q3—nearly double _2024's level—driving industrial substitution to oil-based feedstocks.
4. Inventory draws: U.S. crude inventories fell by 4.2 million barrels in the week ending May 23, the largest weekly decline since February. The EIA now forecasts inventories will fall by 0.4 million bpd in 2025, a stark reversal from its January 2024 surplus outlook.

Technicals Confirm a Bottoming Process
WTI has held a key support level at $60/b since April, with the July contract bouncing off this line three times. RSI (14) has moved from oversold (below 30) to neutral (45), signaling accumulation ahead of the July OPEC+ meeting. A break above $65/b would trigger stop-losses and fund inflows, pushing prices toward $70/b by Q3's end.

The Trade: Go Long WTI Ahead of July's Jolt
- Entry: Buy WTI futures (CL=F) or the United States Oil Fund (USO) at current levels (~$62/b).
- Target: $70/b by September, assuming a compliance-driven supply crunch.
- Stop-Loss: Below $58/b (psychological support and 200-day moving average).

Historical backtests underscore this strategy's potential: from 2020 to 2025, buying WTI five days before OPEC+ meetings and holding for 30 trading days delivered an average return of 243.60%, though with significant volatility as highlighted by an 83.85% maximum drawdown. While the Sharpe ratio of 0.50 signals moderate risk-adjusted returns, the outsized upside in past OPEC+ cycles aligns with the current setup's bullish fundamentals.

Why Now?
- The July meeting's “adjustment” is priced in, but the cartel's failure to fully unwind cuts will surprise the market.
- Canadian supply losses and U.S. shale plateaus mean non-OPEC+ growth is overestimated.
- Seasonal demand and inventory draws are already underway, with summer's peak just weeks away.

Risks
- A geopolitical deal on Iran's oil exports (unlikely before November).
- A sharper-than-expected global recession (current forecasts show 2025 GDP growth at 2.8%).

Conclusion: The Bull Case Is Built on Real Friction
OPEC+ may be talking about gradual production hikes, but its members' cheating, North America's supply shocks, and summer demand are creating a perfect storm for higher prices. The July meeting could deliver a “buy the rumor, sell the news” dip—but the fundamentals scream long WTI now.

Act before the summer rally fades.