WTI Oil Characteristics

WTI Oil is a high-quality crude oil from the US. It’s known for its low specific gravity and low sulfur content. As a benchmark in the oil market, its prices are influenced by supply and demand, global economic growth, and decisions made by OPEC. Additionally, prices also respond to the value of the US Dollar and inventory data provided by the API and EIA. Currently, WTI crude oil has bounced back to about $60.30, bringing some relief to the market as concerns over supply risks from Iran diminish. This recovery follows a price drop below $58 in late December 2025. Now, the focus is shifting from potential supply issues to expected increases in demand. Yet, new trade tensions with Europe related to Greenland pose a significant challenge. An escalating trade conflict could slow down the global economy, which would negatively impact oil demand. Recent preliminary manufacturing PMI data from Germany showed a slight decline, and new tariffs would worsen an already weak situation.

Trading Strategy Considerations

At the moment, bullish trends are supported by strong fundamentals. The EIA reported a surprising decrease of 2.1 million barrels last week, indicating robust current demand that helps mitigate fears about trade. Additionally, key OPEC+ members have confirmed their commitment to production cuts through the first quarter of 2026, providing support for prices. This situation creates a classic trading environment full of volatility, as short-term optimism meets medium-term risks. We should think about using options to manage our risk, like buying call spreads to take advantage of the current momentum while closely monitoring weekly inventory reports. Any significant increase in crude stock levels reported by the API or EIA this week could quickly reverse recent gains. To prepare for a possible escalation regarding Greenland, we are considering buying out-of-the-money put options with expirations set for late February or March. The US-China trade war rhetoric in 2019 led to a sizeable drop in WTI prices, and a similar trend could happen again. These puts would act as a low-cost protection against a sharp downturn if diplomatic negotiations fail. Create your live VT Markets account and start trading now.

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