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A glaring mismatch between benchmark oil prices and expectations of a looming supply overhang has created an imbalance that could end badly for traders. Major energy forecasting agencies, banks and producers expect oil supplies to far outstrip demand through the coming months and well into 2026 due to both an expected slowdown in demand growth and sharp production increases from OPEC+ and other major producers including the United States, Canada, Brazil and Argentina. The International Energy Agency projects global oil production will climb by 2.5 million barrels per day to 105.5 million bpd in 2025, then by another 1.9 million bpd in 2026, with a whopping 4.1 million bpd jump expected for Q1 2026. And the U.S. Energy Information Administration also expects sizable stock builds this year and next. Meanwhile, global consumption is expected to be only 103.74 million bpd this year and 104.44 million bpd next year. In response, spot Brent crude prices have already softened, sliding from over $73 a barrel on July 30 to just under $66 this week, also reflecting the waning summer oil demand in the northern hemisphere. But the longer end of the futures curve is telling a different story. THE SMILE In the oil market - as in other big commodity spaces - participants can buy contracts for future delivery months or years ahead, letting producers, refiners, consumers and speculators either hedge or bet on price moves. The forward curve reflects those expectations and comes in two flavours. Backwardation - when prompt prices sit above future prices - usually signals a tightening market and nudges producers to pump more. And contango - future prices above prompt levels - normally points to oversupply, incentivizing storage over drilling activity. Given that a chorus of experts is calling for significant oversupply in today's oil patch, you'd expect Brent's forward curve to be steeply in contango through 2026. Instead, it's in pronounced backwardation from the prompt October contract out to March 2026, then largely flat to September 2026 before swinging into strong contango. The result: a forward curve "smile". That shape is rare and puzzling. If a sizeable overhang is indeed barrelling down on the market, traders would very likely need to store more crude in tanks or, in a pinch, even on ships in the coming months. This means that a strong price correction may be coming. OPEC TO THE RESCUE What could be driving this mismatch between prices and forecasts? One explanation could be that investors expect OPEC+ to step in if necessary. The group, which includes the Organization of the Petroleum Exporting Countries, Russia and other producers, has sharply increased output since April when it started unwinding 2.2 million bpd of supply cuts, part of a series of cuts introduced since 2022 to prop up prices. The move, led by OPEC's de-facto leader Saudi Arabia, was aimed at re-establishing cohesion within the group after several members exceeded production quotas. Riyadh's push to pump more crude also appears to be aimed at increasing its own production share in the global market by squeezing higher-cost producers around the world, such as U.S. shale producers. So even though OPEC+ could reintroduce cuts in the fourth quarter to head off a swelling glut, that belief seems like quite a stretch. First, members that have ploughed capital into new capacity in recent months may balk at having to quickly reverse course. New cuts would also undercut Saudi efforts to claw back market share. And slashing supply risks lifting prices, precisely what U.S. President Donald Trump has urged OPEC to avoid. GEOPOLITICAL MESS Maybe geopolitical confusion explains the smile as investors are struggling to price Trump's trade wars and the sprawl of on-and-off tariffs that - at some point - are likely to sap manufacturing and trade flows, clipping oil demand at the margins. Meanwhile, investors also have to factor in the potential tightening of U.S. and European Union sanctions on Russia and Iran, which could further complicate supply chains. Trump's threat of secondary sanctions on buyers of Russian crude - particularly China and India - could certainly scramble global trade. And yet, geopolitical jitters are hardly new to oil markets, and they certainly can't fully explain the curve's grin. Finally, it could simply be that traders don't believe the market forecasts. But even if that's the case, the stubborn disconnect should make them nervous, particularly given all the unknowns. If the IEA's overhang materializes, the math argues for inventory builds and a forward curve tipping into contango. So traders need to watch out. This deepening smile could well end in tears. Enjoying this column? Check out Reuters Open Interest (ROI),your essential new source for global financial commentary. ROI delivers thought-provoking, data-driven analysis. Markets are moving faster than ever. ROI can help you keep up. Follow ROI on LinkedIn and X.

Market regulator Securities and Exchange Board of India (Sebi) has directed exchanges to de-freeze Sanjiv Bhasin's trading and demat accounts after the former IIFL director deposited Rs 1 crore with the Sebi in compliance with the Securities Appellate Tribunal (SAT).The SAT's August 1 order came on an appeal filed by Bhasin against a Sebi interim order that had barred him from accessing capital markets over alleged stock manipulation."Further, Hon’ble SAT vide order dated August 1, 2025 directed above noticee to deposit a sum of Rs 1 Crore in a fixed deposit with lien mark in favour of SEBI. Subject to such deposit, the accounts frozen by the SEBI shall be released. SEBI has communicated above entity has complied with the aforesaid direction of Hon’ble SAT and directed to de-freeze trading/demat accounts of pertaining said entity," NSE said in a circular, informing about a development.In the appeal filed before SAT, Bhasin said that the maximum profit alleged to have been made is Rs 62.75 lakhs even if the calculation made by Sebi is taken at the highest. Bhasin urged the appellate tribunal to stay the direction for disgorgement and allow it to approach the regulator to participate in the proceedings by imposing a minimum amount.Market manipulation caseBhasin, at the centre of a regulatory storm over alleged stock manipulation, has been barred from accessing the capital markets. The market regulator in its June 17 interim order had ordered impounding of unlawful gains amounting to Rs 11.37 crore.Sanjiv Bhasin, in the capacity of director IIFL, used to appear in various media channels as a guest expert and provide stock recommendations. Sebi noted that before appearing on media channels for giving stock recommendations, he took positions (majorly buy) in entities Venus Portfolios Private Limited, Gemini Portfolios Private Limited and HB Stockholdings Limited, which the regulator identified as profit makers in the alleged fraudulent scheme devised by him.Bhasin traded through a broker named RRB Master Securities Delhi Limited where he first bought securities himself and then recommended the same securities to the public on news channels or IIFL Telegram Channel.The trades were made through Jagat Singh and Rajiv Kapoor who were dealers of RRB Master.Sebi noted that the stock recommendation in media channels included those scrips in which he had already taken position (majorly buy). Those recommendations used to create a huge impact on the price/volume of the stock, owing to his large viewership.Once the prices of securities increased after his recommendations, Bhasin used to sell the securities, making a profit."Accordingly, Sanjiv Bhasin manipulated the price of securities and made ill-gotten gains," the order read.This is an interim order passed by Sebi's Whole Time Member Kamlesh C. Varshney.Sebi conducted an investigation for the period from January 1, 2020 to June 12, 2024 to arrive at the findings. It had received three complaints in September-October 2023.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)