The price of WTI Oil is rising, close to $59.50 per barrel. This increase comes as worries about US-China trade tensions ease. President Trump is open to a deal with China, and more talks with President Xi Jinping are planned in South Korea. OPEC+ expects that the current oil supply shortage will decrease by 2026. The recent rise in oil prices is also supported by tensions between Ukraine and Russia, as the US considers sending long-range Tomahawk missiles to Ukraine.

Geopolitical Risk Premiums

Geopolitical risk premiums have decreased after Hamas released hostages and Israel freed Palestinian prisoners. However, WTI Oil faces pressure as OPEC+ plans to boost production, which may slow the current price increase. WTI Oil is a high-quality crude oil mostly produced in the US and serves as a benchmark in the oil market. Its price is influenced by global supply and demand, geopolitical events, OPEC’s choices, and the US Dollar’s value. Weekly oil inventory reports from the American Petroleum Institute and the Energy Information Agency also affect WTI prices. These reports show shifts in supply and demand, impacting market prices. OPEC’s decisions on production quotas have a direct effect on WTI prices. Lower quotas usually push prices higher. Currently, West Texas Intermediate crude oil hovers around $59.50, influenced by improved demand signals from easing US-China trade relations and a more cautious long-term supply outlook. President Trump’s willingness to meet with President Xi Jinping eases fears of a trade war, supporting oil prices for now. This creates a complicated situation where short-term sentiment is positive, but the supply forecast for 2026 looks heavier.

Trading Strategies and Market Volatility

The optimistic view is backed by recent data from the U.S. Census Bureau, showing a 4.5% increase in goods traded between the US and China in the third quarter of 2025 compared to the previous quarter. This suggests that the improved communication is leading to real economic activity, which might boost energy demand. For traders, this could make near-term call options with strike prices over $60 appealing, especially if positive news comes from the summit in South Korea. On the other hand, we must consider the supply side since OPEC+ plans to raise production. Recent reports indicate that OPEC+ compliance with production quotas dropped to 98% in September 2025 from an average of 103% in the first half of the year, suggesting more barrels are entering the market. The expected reduction in the supply shortfall by 2026 may limit significant price increases, making long positions riskier over time. This tug-of-war between geopolitical negotiations and supply fundamentals signals greater market volatility in the coming weeks. A similar situation occurred in 2019, where trade war developments caused sharp but temporary price spikes before fundamentals took over again. Therefore, strategies that benefit from price swings, like purchasing a straddle (both a call and a put option), may be wiser than betting on a single direction. While geopolitical risks from the Russia-Ukraine conflict and the Middle East are currently lower, they still pose significant threats that could lead to sudden price changes. The potential for the US to send new missiles to Ukraine introduces a risk premium that isn’t fully recognized in the market. Traders should closely monitor weekly EIA inventory reports, as an unexpected drop could trigger a short-term price rally, while an increase would reinforce the bearish supply outlook. Create your live VT Markets account and start trading now.

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