Hello traders,
Lately I’ve been watching the oil market very closely, more closely than usual.
Over the past few weeks, the IEA revised its 2025 supply forecasts upward. OPEC+ output is rising, non-OPEC producers like the US, Brazil, Guyana, Canada are all increasing production.
Demand growth, by contrast, is creeping up more slowly. The gap between rising supply and modest demand is building into an oversupply risk that many traders are still underestimating.
Oil prices tried to rally on geopolitical fears and sanctions talk, but then sellers stepped in hard once the supply data sank in. I was already talking about this a month ago, when I mentioned that the first break will set the tone for months. Oil, gold, and equities are all coiled at make-or-break levels.
Stocks rose, inventories grew, and the market started behaving like it’s carrying weight, heavy supply, cautious demand. That’s the kind of imbalance that creates opportunity, but also danger if you’re not nimble.
Here’s what I pulled from this: in markets like this, the biggest profits often come not from riding the wave but from predicting the exhaustion of it.
I started watching supply signals, production increases, inventory reports, as much as demand signals. The recent big move in oil wasn’t driven by a new crisis. It was driven by the fear that oil has become too comfortable being in surplus.
So how I’m trading it: I’m shorting strength in oil futures or energy stocks on days when the headlines are trying to revive bullish sentiment, when news about sanctions or supply disruptions gets overblown without the numbers to back them up.
And I’m keeping hedges in place, holding long positions in clean energy or renewables where the stories support both policy tailwinds and structural demand, because while oil may wobble, the transition story isn’t going away.
Equities are flying on rate-cut euphoria, but oil’s slump and gold’s resilience are flashing a more cautious story. When markets price in perfection, one crack can start the unwind. I’m watching it.
What you should watch: inventory data, OPEC+ meeting hints, US-refining activity, any strong signs that demand is cooling.
If supply keeps outpacing demand growth, even slightly, you’ll see oil prices pressured, and energy-related trades that assume tight supply will be vulnerable.
The lesson here is simple: in markets with excess supply, strength tends to be fragile.
When everyone’s expecting oil to go up on every scare, your edge is in betting on sanity, on the reality behind the headlines.
Trade that gap, not the noise.
See you in the next one.
Imre Gams
Editor, The Trading Room
