Saudi Arabia pushes for "production increase"—can oil prices hold at $60?
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Crude oil options trading activity has surged, with investors making heavy bets that Brent crude will break below the key psychological level of $60 per barrel.
On Thursday, activity in the crude oil options market showed that put options for $55 and $60 expiring in December have seen a surge in activity, with open interest in both totaling the equivalent of 120 million barrels of oil.
Among them, trading volume for the $55 put option reached its highest level since early April, when OPEC shocked the market by announcing that the supply increase would be three times the originally planned amount.
As previously mentioned by WallstreetCN, OPEC+ member countries will hold a video conference on Sunday to discuss how to handle the currently suspended 1.66 million barrels per day in supply. Saudi Arabia hopes to speed up the next oil production increase.
As a result, the market's willingness to seek protection against downside risks has risen sharply. The price of the $60 put option for December delivery soared from $0.59 to $1.35 within just three days. The premium of put options relative to call options has reached its highest point since early August.
According to WallstreetCN, US non-farm payroll data in August was bleak, weak employment triggered concerns over crude oil demand, and combined with news that OPEC+ may increase production on Sunday, crude oil prices continued this week's downward trend, falling 2% on Friday. WTI crude oil futures once fell below $62, and Brent crude fell to the $66 mark.
(WTI crude oil futures drop)
Saudi-led Production Push to Regain Market Share
It is reported that Saudi Arabia is pushing OPEC+ to increase production ahead of the original plan to restore supply by the end of next year. According to informed sources, Saudi Arabia hopes to offset declining prices by raising production and regain market share previously lost to rivals.
OPEC representatives said that Saudi Arabia is eager to reclaim sales volume that was lost to competitors such as US shale oil producers.
Over the past five months, the alliance has already accelerated the resumption of a batch of previously shut-in production capacity and now faces a decision on how to handle the remaining 1.66 million barrels per day of suspended supply.
Livia Gallarati, global head of crude oil at Energy Aspects Ltd., said in a media interview:
The latest news we’ve heard from the group indicates that they are seriously considering lifting this last batch of suspended supply as soon as possible, rather than later.
Rising Risk of Oversupply
Further production increases will threaten to intensify the Q4 oversupply expected by forecasting agencies such as the International Energy Agency, putting additional downward pressure on oil prices.
Analysts and traders anticipate a global crude oil surplus will form by the end of the year.
According to a previous article by WallstreetCN, Goldman Sachs expects that oil supply growth driven by non-OPEC countries (excluding the US) will lead to a global surplus of 1.8 million barrels/day in 2026, which will eventually push Brent prices down to $50 per barrel by the end of 2026.
If oil prices break below $60, it will be favorable for US President Trump, who has repeatedly attempted to talk prices down.
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