WTI crude oil prices climbed to about $60.80 on Wednesday, up 1.0% for the day. This increase occurred despite signals of lower supply. Traders are waiting for the official report from the Energy Information Administration (EIA). The American Petroleum Institute noted a rise of 6.5 million barrels in US crude oil stocks for the week ending October 31. This comes after a decrease of 4.0 million barrels the week before, resulting in a net gain of 3.6 million barrels for the year. Ongoing geopolitical tensions in the Middle East and the Black Sea are supporting the oil market. For instance, Ukraine has been launching intensified strikes on Russian energy facilities, including Lukoil’s Norsi refinery. These developments could heighten supply concerns and help maintain WTI prices.

Potential Market Impact

In the short term, large stock increases of US crude might hinder WTI’s recovery. However, geopolitical tensions and strong demand for refined products could balance these pressures. Currently, WTI is trading in a range between $59.50 and $61.30 and is testing resistance around $61.00. If it breaks out, prices could rise to $62.50 and possibly $66.00, while support is near $59.46, based on the 100-period Simple Moving Average. The market is experiencing a tug-of-war, reflected in WTI oil hovering near $61. The bearish influence is driven by rising US stockpiles, supported by the recent EIA report showing a significant build of 5.8 million barrels for the last week of October. This indicates that supply is currently outpacing immediate demand in the United States. On the flip side, a strong geopolitical risk premium is keeping prices from dropping further. We are keenly observing the ongoing Ukrainian strikes on Russian oil refineries, as they risk taking a large amount of refined products off the global market. Any escalation in the Middle East or Black Sea will increase this uncertainty, making traders reluctant to short oil positions.

Strategies for Traders

This mix of signals suggests high volatility in the coming weeks. The CBOE Crude Oil Volatility Index (OVX) is near 45, well above its long-term average, indicating that the options market anticipates sharp price fluctuations. We remember when prices soared above $120 a barrel in 2022 due to geopolitical fears—showing how supply shocks can quickly outpace inventory data. For derivative traders, the current situation suggests strategies that can benefit from a significant price move in either direction. Buying a straddle, which involves holding both a call and a put option with the same strike price and expiration, could be wise. This position will be profitable if oil breaks decisively out of the current $59.50 to $61.30 range before option expiration. Alternatively, for those who have a specific directional outlook, using spreads can help to manage costs in this volatile market. If a trader expects geopolitical tensions to prevail, they could consider a bull call spread, targeting a move toward the $66 September high. Conversely, a bear put spread offers a way to target the $56 level if inventory builds continue to impact the market. We should also keep an eye on the upcoming OPEC+ meeting set for December 1, 2025. Current prices are close to levels that have historically led to discussions about production cuts. Any statements from key members could significantly influence the market. This makes longer-dated options expiring in December or January valuable for positioning ahead of this important event. Create your live VT Markets account and start trading now.

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