West Texas Intermediate (WTI) US Crude Oil prices are currently hovering around mid-$58.00. A slight rebound has kept prices stable, although concerns about a potential trade conflict between the US and EU, alongside easing tensions with Iran, are preventing prices from rising above mid-$59.00. US President Donald Trump has softened his stance on Iran, lowering fears of any supply disruptions. However, the threat of new US tariffs on European goods related to Greenland adds to global uncertainty, affecting demand predictions.

US Dollar Impact

The strength of the US Dollar, driven by heightened risk aversion, helps keep WTI prices steady. Upcoming US economic reports and global events could have an effect on future prices. WTI Oil, a premium type of US Crude Oil, acts as a market benchmark. Its price is mainly influenced by supply and demand, political stability, and the value of the Dollar. Weekly inventory reports from the API and EIA provide valuable insights into supply and demand, affecting price trends based on inventory levels. OPEC’s production decisions greatly influence WTI prices, with its quotas playing a major role in global supply and demand dynamics. Key OPEC+ decisions can lead to significant shifts in WTI pricing through changes in production levels.

Geopolitical and Economic Factors

Reflecting on late 2025, WTI prices were held below $60 due to fears of a US-EU trade war over Greenland and fluctuating views on Iran. While some headlines have faded, the ongoing uncertainty in demand linked to trade policies continues to impact the market, leading to short-term price changes. Recently, we are faced with stronger headwinds as the IMF downgraded global growth forecasts for 2026 to 2.9%, citing weakness in Europe and China. This economic pressure is compounded by a stronger US dollar, with the Dollar Index (DXY) reaching a three-month high of 104.5, as the Federal Reserve signals that interest rates may remain high for an extended period. A stronger dollar raises oil prices for those holding other currencies, thereby reducing demand. On the supply side, there are also signs of easing concerns. OPEC+ production data for December 2025 revealed a slight slip in compliance with quotas, as a few key members exceeded their targets. More recently, the EIA reported a surprising build of 2.1 million barrels in US crude inventories, contrary to analyst expectations of a small decrease. This suggests that supply is currently surpassing demand in the world’s largest oil-consuming country. Given this backdrop of slowing demand and ample supply, traders should prepare for prices to remain steady or possibly decrease in the coming weeks. Buying put options or establishing put spreads on WTI futures might be a safe way to profit from potential price declines towards the low $50s. Currently, the implied volatility in options is moderate, making these strategies relatively affordable. Nevertheless, we must be alert to the possibility of unexpected increases in geopolitical tensions, especially in the Middle East, which could tighten supply quickly. A sudden shift by the Fed towards a more gentle approach could weaken the dollar and support crude prices. Therefore, it’s essential to use strategies with defined risks or set clear stop-loss orders to handle these potential surprises. Create your live VT Markets account and start trading now.

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