The price of West Texas Intermediate (WTI) oil rose to about $61.45 during the Asian trading session on Monday. This increase comes after positive developments in trade talks between the US and China, raising hopes for better oil demand. The American Petroleum Institute will release its weekly crude oil stock report on Tuesday. The preliminary trade deal between the US and China is expected to prevent new tariffs and keep rare earth minerals flowing to the US. A meeting between US President Trump and Chinese President Xi Jinping is planned for later this week, which could ease trade tensions and boost global economic growth.

Impact of US Sanctions on Russian Oil

The US has recently imposed sanctions on Russia’s Rosneft and Lukoil, affecting more than 5% of global oil production. Since Russia is the second-largest oil producer after the United States, these sanctions could limit its crude exports, tightening global supply and impacting WTI prices. Several factors influence WTI oil prices, including supply and demand, political events, and changes in currency values. Reports about inventory levels and decisions made by OPEC also play a significant role in price fluctuations. OPEC and its allies have raised oil supply forecasts, suggesting a possible surplus in the coming years. With WTI crude oil priced around $61.50, we’re seeing a mix of positive sentiment and bearish fundamentals. The recent US-China trade agreement is creating optimism, hinting at a rebound in global energy demand. A similar situation occurred in late 2019 when advancements on the “Phase One” trade deal resulted in a more than 10% increase in oil prices during the fourth quarter.

Recent Data on Oil Inventories

The new sanctions on Russia’s Rosneft and Lukoil introduce a significant supply-side risk that traders can’t overlook. When tough sanctions were imposed on Russia’s energy sector in 2022, Brent crude prices soared to nearly $140 per barrel, indicating a potential for significant price increases. Traders should prepare for heightened volatility, as any escalation could rapidly remove millions of barrels from the global market. However, any price increases might be limited by OPEC+ plans to boost supply into 2026 as they aim to regain market share. According to recent data from the EIA, global oil inventories have risen by about 0.5 million barrels per day this year, suggesting that a supply surplus could prevent major price increases. Given this situation, selling call options at higher prices, around the $68-$70 level, could be a smart strategy to protect long positions. In the coming weeks, focus should be on the upcoming API and EIA inventory reports, along with the crucial Trump-Xi meeting. If there is a larger-than-expected drop in crude oil inventories, combined with positive trade news, WTI could break above $65. Traders might look into strategies like bull call spreads to take advantage of a potential short-term rally while minimizing risk from the bearish supply outlook. Create your live VT Markets account and start trading now.

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