The US government has put sanctions on major Russian oil companies, Rosneft and Lukoil. They accuse Russia of refusing to work towards ending the conflict in Ukraine. This decision comes shortly after a postponed meeting between US President Donald Trump and Russian President Vladimir Putin. Because of these sanctions, the price of West Texas Intermediate (WTI) oil rose by 4.03%, reaching $59.88. WTI oil is a popular type of crude oil known for its low sulfur content, and it is used worldwide as a benchmark for oil prices.

Factors Affecting WTI Oil Prices

Several things can influence WTI oil prices. These include global supply and demand, political tensions, and OPEC’s actions. The value of the US Dollar is also important; a weaker dollar can make oil cheaper. Weekly reports on oil inventory from the American Petroleum Institute (API) and the Energy Information Administration (EIA) offer insights into changes in supply and demand. OPEC, a group of 12 oil-producing countries, affects prices with its production decisions. For example, reduced production raises prices, while increased production lowers them. We are witnessing a familiar trend in the oil market, similar to the sanctions during the Trump administration. The new restrictions on Russian oil companies present an immediate risk to oil supply. Traders should see this as part of ongoing geopolitical tensions that have influenced energy markets since the full-scale invasion of Ukraine in 2022. The market responded quickly, with WTI crude futures rising to about $92.50 per barrel, a significant jump from the low $80s seen last month. This price movement indicates that traders expect a long-term disruption in global supply. We can expect more volatility in the weeks ahead.

Trading Strategies in Volatile Markets

For those trading derivatives, this suggests a bullish outlook on crude oil prices through the end of the year. Buying call options with strike prices of $95 and $100 for December delivery is a direct way to take advantage of the anticipated increase in prices. The market has clearly broken away from its recent stable trading pattern. This perspective is backed by the latest EIA data, which revealed a surprise decrease in crude oil stockpiles of 3.2 million barrels last week. Analysts had predicted a slight increase, so this drop in US inventories supports a bullish outlook. It shows strong underlying demand despite supply concerns. We must also consider OPEC+, which recently agreed to continue its current production cuts until the first quarter of 2026. With OPEC+ keeping supply tight, these new sanctions on a significant non-OPEC+ producer will likely worsen the supply shortage. This creates a strong support level for prices and limits potential losses for long positions. A crucial factor to monitor is the strength of the US dollar. The Dollar Index (DXY) has been near a high of 106.5, which could pressure oil prices by making crude more expensive for other currency holders. Given the high implied volatility, traders may also explore bull call spreads. This strategy can reduce the initial cost while still allowing for potential gains. It helps manage risk in what is expected to be a turbulent trading environment. We need to carefully watch the weekly inventory reports from the API and EIA for any signs of demand decline. Create your live VT Markets account and start trading now.

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