West Texas Intermediate (WTI), a key US crude oil benchmark, was around $59.45 in early Asian trading on Friday. This slight drop came after a reported increase in US crude oil inventories by 574,000 barrels last week, according to the Energy Information Administration. This rise contrasted with the previous week’s increase of 2.774 million barrels. The outlook for WTI prices suggests they may stabilize due to expectations of a quarter-point rate cut by the US Federal Reserve. The CME FedWatch tool indicates an 89% chance of this happening, which might weaken the US Dollar and potentially support WTI prices.

Geopolitical Tensions Impacting Supply

Geopolitical tensions are adding complexity to the situation. Attacks by Ukraine on Russian oil infrastructure could lead to supply issues. Specifically, attacks on the Druzhba pipeline in Russia’s Tambov region may have a significant impact on global oil supply and prices. WTI Oil is a light and sweet type of crude oil from the US, known for its low gravity and sulfur content. Prices are mainly influenced by supply and demand, geopolitical tensions, OPEC’s decisions, and the value of the US Dollar. Weekly inventory data plays a crucial role in shaping market views and prices. Currently, WTI crude is trading below $60. An unexpected increase in US oil inventories points to a potential oversupply, as the EIA reported a rise of 574,000 barrels last week, contrary to market predictions of a decrease. This negative inventory news is being balanced by strong expectations of a Federal Reserve rate cut.

Attention on Upcoming Fed Meeting

Next week, everyone’s eyes are on the Fed, with markets indicating an 89% chance of a rate cut. Recent economic data from November 2025 showed the US unemployment rate slightly increased to 4.1%, while core inflation fell to 2.8%. This allows the central bank some space to ease its policies. A rate cut could weaken the US Dollar, making dollar-denominated oil cheaper and potentially increasing demand. On the supply side, ongoing geopolitical tensions are likely to support prices. The recent Ukrainian attack on Russia’s Druzhba pipeline highlights how supply chains can face sudden disruptions. This event follows the latest OPEC+ meeting on November 30, 2025, where the group decided to keep its current production cuts through the first quarter of 2026, maintaining a tight market. The current situation mirrors late 2023, when concerns about an economic slowdown were offset by OPEC+ production cuts, resulting in a volatile but steady market. At that time, uncertainty about the Fed’s policy changes also caused sharp price fluctuations. This history suggests traders should be prepared for quick changes, especially with the $60 mark serving as a significant psychological threshold for WTI. The upcoming Fed meeting is expected to be a major catalyst, prompting derivative traders to get ready for possible spikes in volatility. In this environment, using options to manage risk—such as buying puts to safeguard long futures positions or creating spreads—could be a wise strategy. For those anticipating bigger price movements following the announcement, strategies like straddles could be employed to capitalize on the expected increase in volatility. Create your live VT Markets account and start trading now.

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