West Texas Intermediate (WTI) crude oil climbed to about $57.30 early Monday due to rising geopolitical tensions. The US taking action against Venezuelan President Nicolas Maduro has raised concerns about possible oil supply issues, contributing to the increase in prices. The US government executed a “large-scale strike” on Venezuela without Congress’s approval. This move, along with changes in Venezuela’s oil production, has affected the market. A key report from the American Petroleum Institute (API) will be released on Tuesday and could influence WTI prices.

OPEC’s Position Amid Geopolitical Tensions

OPEC+ has maintained steady oil output during these geopolitical tensions. The group has avoided discussing the crises impacting its member countries. WTI Oil is known for its high quality and serves as a benchmark in the oil market. Factors like global economic growth, political instability, and decisions made by organizations like OPEC can affect WTI prices. Inventory reports from the API and the Energy Information Agency (EIA) provide insight into supply and demand. OPEC’s choices about production quotas often have a large impact on oil prices. The value of the US Dollar also plays a role in WTI prices, as oil is traded in Dollars. A weaker Dollar makes oil cheaper for buyers using other currencies. We recall this time last year in early 2025 when chaos in Venezuela caused WTI prices to soar to around $57 a barrel. That geopolitical shock quickly shifted focus to worries about supply disruptions, prompting the market to factor in a significant risk to global oil availability.

Market Adjustments and Current Trends

However, that price surge was short-lived, as other producers stepped in to make up for the loss. Venezuelan oil production, already low, dipped below 400,000 barrels per day. Still, the global market absorbed this reduction fairly well. By mid-2025, attention turned back to global economic demand and OPEC+ policies. Currently, WTI is trading much higher at around $82, mainly because OPEC+ continued its production cuts through late last year. Nonetheless, there are signs of weakness. The EIA’s recent report showed an unexpected inventory increase of 2.1 million barrels, indicating that demand may be slowing down. The International Energy Agency has also slightly reduced its demand growth forecast for 2026, citing a slowdown in China’s manufacturing sector. For traders, this environment features high prices coupled with rising uncertainty about demand. Buying long-dated put options may be a cost-effective way to hedge against a potential economic slowdown that could cause prices to drop in the second quarter. This strategy can help protect against downside risk while maintaining a position. Given the tension between limited OPEC+ supply and possibly weaker demand, increased volatility is expected. We anticipate sharp price movements around key data releases, especially the upcoming API report and the OPEC+ meeting on February 1st. Traders might consider strategies like straddles or strangles to take advantage of significant price changes in either direction without predicting which way it will go. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now