West Texas Intermediate (WTI) oil prices hit around $57.55 during early Asian trading on Wednesday. This increase comes from improved trade relations between the US and China, which overshadow concerns about a stronger US dollar and excess oil supply. The American Petroleum Institute (API) stated that US crude inventories fell by 2.98 million barrels for the week ending October 17. This follows a rise of 3.524 million barrels in the previous week, resulting in a net loss of 2.423 million barrels for the year.

US-China Trade Tensions

US Treasury Secretary plans to meet with Chinese officials to discuss trade issues before a possible meeting between President Trump and President Xi Jinping. Easing trade tensions could affect WTI prices because the US and China are major consumers of crude oil. The Organization of the Petroleum Exporting Countries and its allies (OPEC+) plan to increase oil supply, which may lead to a surplus. The International Energy Agency (IEA) predicts a global surplus of nearly 4 million barrels per day by 2026, which could restrain WTI price increases. Reflecting on the past, it’s noteworthy that WTI crude oil traded near $57.50 due to improved US-China trade relations from a previous administration. As of October 22, 2025, WTI is now around $85 a barrel. While fundamental factors have changed, geopolitical tensions and supply updates are still crucial for market movements. Unlike the previous inventory reduction, the latest Energy Information Administration (EIA) report for the week ending October 17, 2025, revealed a surprising increase of 1.5 million barrels. Analysts had expected a slight decline, suggesting weaker consumer demand in the US. This information is putting downward pressure on prices, limiting the recent rise we observed this month.

OPEC Production Cuts

On the supply side, OPEC+ is committed to its production cuts, which have helped keep prices strong above $80. The group plans to stick to its current output policy until the end of the year to maintain market stability. This careful approach contrasts with earlier IEA forecasts that projected a significant supply surplus for 2026. Concerns about global demand are re-emerging, and traders should pay attention. The International Monetary Fund (IMF) recently lowered its global growth forecast for 2026 from 3.2% to 3.0%, citing ongoing inflation in major economies. A weaker economic outlook could lead to lower oil demand, impacting prices. With these mixed signals of a surprise inventory increase against tight OPEC+ supply, we should expect more volatility in the coming weeks. Traders might explore strategies such as purchasing straddles or strangles to benefit from sharp price movements. Using options to define risk is wise, with puts providing a safeguard against a potential drop to the low $80s. Key events to keep an eye on include the next weekly EIA inventory report and any updates from officials ahead of the next formal OPEC+ meeting in early December. Any changes in expected supply cuts or a significant increase in US stockpiles could lead to notable price shifts. Traders should stay alert and ready to adjust based on new information. Create your live VT Markets account and start trading now.

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