WTI Crude Oil prices have fallen over 2%, nearing $66.00. This drop is linked to ongoing trade tensions affecting market confidence. US President Donald Trump has threatened a 30% tariff on imports from the EU and Mexico, set to take effect on August 1. This has caused concerns about a decline in global trade and energy demand.

Geopolitical Dynamics

Trump also warned Russia to reach a ceasefire with Ukraine within 50 days, or they could face tariffs of up to 100% on Russian goods. This situation adds to the complexities affecting Oil markets. Currently, WTI prices are below the resistance level of the 200-day SMA at $68.00. The price is above $66.14, with support from the 50-day and 100-day SMAs at approximately $64.59 and $64.87. WTI Oil is a key Crude Oil variety from the US, recognized for its high quality. It plays a significant role in global trading, alongside Brent and Dubai Crude. WTI Oil prices are influenced by supply and demand, as well as geopolitical factors. Additionally, OPEC decisions and the value of the US Dollar impact prices. API and EIA inventory reports are crucial for WTI prices, showing trends in supply and demand. OPEC quotas also affect market prices by modifying supply.

Market Volatility Strategy

Given the mixed signals in the market, we expect increased volatility. Traders should prepare for sharp price movements instead of a clear trend. Although our analysis focuses on a price around $66, WTI has recently traded closer to $78, highlighting the tensions in the market. The tariff threats are more than just background noise; they directly influence demand. We are witnessing clear signs of an economic slowdown. For instance, China’s recent Caixin manufacturing PMI barely remained above growth territory at 51.4, suggesting that global commodity demand is weak. This demand worry is reinforced by the latest EIA data. Last week’s report revealed an unexpected increase in crude oil inventories by 3.7 million barrels, contrary to analyst predictions of a 1.0 million barrel decline. This indicates that supply is exceeding consumption in the United States, which is a negative sign for prices falling below the 200-day moving average. Additionally, the latest OPEC+ meeting extended core cuts but also announced plans to gradually lift 2.2 million barrels per day of voluntary reductions beginning in October, which could keep prices from rising significantly. However, dismissing the potential for a sharp price jump would be a mistake. The warnings against Russia are serious. There have been consistent drone attacks on Russian oil refineries, with estimates suggesting that over 15% of the nation’s refining capacity has faced disruptions. If any escalation threatens Russia’s major oil export terminals, like the significant port of Novorossiysk, it could drive prices well beyond recent highs. A historical reference is the 2019 drone attacks on Saudi Arabia’s Abqaiq facility, which removed 5% of global oil supply and caused a nearly 15% price spike overnight. Thus, we recommend avoiding straightforward directional bets. Instead, we suggest buying volatility. A long options straddle, which involves purchasing both an at-the-money call and put, can profit from a significant price move in either direction. This strategy protects traders from being caught on the wrong side of major news. For those with a bearish outlook due to economic challenges, selling out-of-the-money call credit spreads offers a way to define risk while exploiting time decay and the strong technical resistance overhead. The market is a coiled spring, and traders in derivatives should focus on profiting from inevitable price jumps rather than trying to predict their direction. Create your live VT Markets account and start trading now.

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