WTI crude oil prices dropped to about $58.20 during the Asian session on Wednesday. This decrease is mainly due to a stronger US Dollar following positive job data from the US. Iraq also restarted production at the West Qurna 2 oilfield after fixing a pipeline leak. According to the American Petroleum Institute (API), US crude stockpiles decreased by 4.8 million barrels last week. The number of job openings in the US rose from 7.658 million in September to 7.67 million in October, exceeding expectations. This strong data highlights the resilience of the US labor market, which is boosting the US Dollar and affecting commodities priced in USD. Additionally, the flow of crude from Lukoil’s oilfield adds 460,000 barrels per day to the global supply.

Influence of US Inventories

Even with the return of crude flow, a larger-than-expected drop in US crude stockpiles could support WTI prices. API’s recent data shows a year-to-date increase of 121,000 barrels in US inventories. Weekly reports from the API and the Energy Information Administration (EIA) influence WTI prices by indicating changes in supply and demand. OPEC decisions play a role by managing member nations’ production quotas. Changes to these quotas affect supply levels and thus impact global crude oil prices. Additionally, the US Dollar’s value and geopolitical issues can cause fluctuations in WTI oil prices. The decline of WTI below $58.50 is a significant indicator for us. The strong US Dollar, boosted by solid job market data, presents challenges for oil prices. The resumption of production at Iraq’s West Qurna 2 field only adds to the supply pressure. We expect the dollar’s strength to continue, especially after last week’s jobs report indicated the addition of 210,000 new jobs. With inflation rates lingering around 2.8%, the Federal Reserve has little reason to cut rates, keeping the Dollar strong. This makes oil pricier for international buyers, limiting potential price increases.

Factors Affecting Oil Prices

On the supply side, we’re considering more than just the restored Iraqi output. While OPEC+ agreed to continue production cuts into early 2026, some members have been underperforming. This hidden increase in supply is creating a bearish trend not fully shown by the official quotas. However, we can’t overlook the significant 4.8 million barrel draw reported by the API. This indicates that US demand stays healthy, reminiscent of previous winter months, similar to the inventory draws during the colder days of late 2022. All attention is now on today’s official EIA data to confirm this bullish trend or support the general bearish outlook. Traders in derivatives should focus on the market’s volatility, which has been increasing. We are considering put options to protect against further declines, especially if oil falls below the technical support level of around $57.50. Call spreads might also be appealing to capture limited gains if the EIA report reveals an even larger draw. In the coming weeks, global demand signals will be crucial. Recent manufacturing data from China has been disappointing, raising doubts about the strength of the world’s largest oil importer. Combined with the strong dollar, this creates a tough environment for crude prices as we approach the end of 2025. Create your live VT Markets account and start trading now.

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