Oil at a Crossroads: IEA Surplus Signals vs OPEC+

Oil starts the week with opposing forces: International Energy Agency (IEA) surplus guidance versus OPEC+’s measured supply increases, right into U.S. inventory day and the Fed/BoE decisions. Below is a concise, sourced game plan for Brent and WTI, with a scenario tree for the EIA print.

TL;DR

• IEA signals larger Oil supply surplus for 2025-2026

• OPEC+ completes 2.2 million b/d production increase by September 2025

• EIA inventory data on 17 September may trigger price volatility

• Brent crude faces resistance at $67-68, support near $64-65

• Fed decisions this week could impact USD and Oil price correlation

Market Fundamentals Shift as Supply Dynamics Evolve

The global Oil market stands at a pivotal moment as conflicting signals emerge from major market participants. The IEA Oil Market Report indicates world oil demand is forecast to increase by 740 kb/d y-o-y in 2025, up marginally from last month's Report, while supply growth significantly outpaces this demand increase.

Eight OPEC+ countries will implement a production adjustment of 547,000 barrels per day in September 2025 from the August 2025 required production level, marking the completion of their 2.2 million barrel per day voluntary cut unwinding that began in April 2025. This decision, announced on 3 August, reflects what the alliance describes as "current healthy market fundamentals". (Source: Reuters)

Brent Crude Oil traded at $66.89 per barrel on 12 September 2025, representing a modest 0.99% daily increase, but remaining 6.59% lower than levels a year ago, according to market data. WTI crude similarly rose to $62.56 per barrel, up 0.43% on the day but down 8.87% year-over-year.

Oil Price Pressure from Global Supply Surplus

The IEA's September 2025 Oil Market Report presents a concerning picture for Oil bulls. Non-OPEC+ producers are now on track to boost production by 1.4 mb/d in 2025 and by just over 1 mb/d next year, with the United States, Brazil, Canada, Guyana, and Argentina operating at or near all-time production highs.

The U.S. Energy Information Administration (EIA) expects the Brent crude oil price to decline significantly in the coming months, falling from $68 per barrel in August to $59/b on average in the fourth quarter of 2025, and around $50/b in early 2026. This bearish outlook stems from anticipated inventory builds as production increases outpace demand growth.

The EIA data indicates U.S. crude oil storage levels remain 3% below their typical five-year average at this period, which indicates additional storage capacity exists. The upcoming EIA inventory report on 17 September 2025 will deliver essential information about market trends for the near future.

Central Bank Week Adds Complexity

This week's oil market dynamics unfold against the backdrop of major central bank decisions. The European Central Bank kept its deposit rate unchanged at 2.0% on 11 September 2025, maintaining its pause after eight rate cuts since June 2024. The Federal Reserve's upcoming meeting on 17-18 September  2025 and the Bank of England's decision on 18 September 2025 may influence USD strength and, consequently, dollar-denominated Oil prices.

Trade tensions and economic uncertainty continue to weigh on demand forecasts. The Organisation for Economic Co-operation and Development (OECD) demand growth of 80 kb/d y-o-y in 1H25 has exceeded expectations, supported by lower Oil prices, but is forecast to move into contraction in the remainder of the year, potentially limiting price recovery prospects.

Three Actionable Takeaways for Traders

1. Bias Framing Strategy

The upcoming 10:30 ET (6:30 PM GST) inventory print on Wednesday presents traders with potential mean-reversion trading opportunities when Brent and WTI prices reach established resistance levels. Supply growth exceeds demand, so resistance levels will only break if major supply disruptions happen. Traders should reduce or eliminate their positions near the EIA release time to protect against unexpected market-moving news.

2. Inventory Laddering Approach

A two-ticket position plan can assist traders in managing market volatility. The plan includes opening a starter position at the beginning of the week, followed by a possible second entry after the EIA data becomes available. Stop-Losses enable traders to protect their positions from headline-driven market volatility while upholding their risk management rules.

3. Cross-Market Monitoring

The EUR-zone final Harmonised Index of Consumer Prices (HICP) data on Wednesday, and Federal Reserve communications will determine the direction of USD. The USD price of Oil may experience support through bear traps at the start of the week when dovish central bank statements lead to a decline in the value of the USD.

Technical Levels and Trading Instruments

Key instruments to monitor include:

• Brent Oil: Currently trading near $67 resistance, with support around $64

• Crude Oil (WTI): Resistance at $65, support near $60

• S&P 500: May show correlation with oil sector movements

• USD Index proxies: Through major currency pairs for dollar strength assessment

Oil Price Forecast: OPEC+ Production vs Demand Growth

The OPEC+8 decision to complete the phasing out of the November 2023 tier of voluntary output reductions totalling 2.2 million b/d, with the last production increment of 547,000 b/d to be returned in September, represents a significant supply addition to an already well-supplied market.

However, the alliance retains flexibility. The phase-out of the additional voluntary production adjustments may be paused or reversed, subject to evolving market conditions, suggesting OPEC+ may respond if prices fall too sharply.

The current refinery operations across different regions, together with seasonal patterns, create short-term market support. The tracking data shows that most of the additional volumes went to regional refineries and power plants instead of leaving the area which reduces the immediate effect on worldwide markets.

Risk Factors and Considerations

The current Oil market operations face multiple potential disruptions that could affect their stability.

Geopolitical tensions: The current geopolitical situation creates supply risks because Russia, Iran, and Venezuela face ongoing conflicts and sanctions enforcement.

Chinese demand: Chinese need serves as a major demand centre, which means changes in Chinese consumer behaviour will create substantial effects on worldwide market equilibrium.

Weather events: Short-term market volatility occurs because of Hurricane season and winter demand patterns.

Production discipline: The current production levels of Iraq, the UAE, Kuwait, and Kazakhstan exceed their quota limits by 1.1 mb/d, which indicates their actual production growth might not match their declared targets.

* Past performance is not indicative of future results.