WTI traded near $62.80 a barrel in the Asian session on Friday, after dropping more than 3% in the prior session. Prices remained under pressure as oversupply concerns continued.
The International Energy Agency (IEA) expects a surplus of just over 3.7 million barrels per day in 2026 and cut its global oil demand forecast for that year. The IEA also said global inventories grew in 2025 at the fastest pace since the 2020 pandemic.
Market Supply Pressure
US President Donald Trump said talks with Iran could continue for up to a month. That eased near-term fears of supply disruptions. Israeli Prime Minister Benjamin Netanyahu said Trump appeared to be working on a framework to address tensions tied to Iran’s nuclear activities.
Industry data and Reuters calculations showed Russia’s seaborne oil product exports rose 0.7% in January from December, reaching 9.12 million metric tons. The increase was linked to strong fuel output and seasonally weaker domestic demand.
Venezuela was reportedly preparing to allocate more oil production acreage to Chevron and Spain’s Repsol. A Bloomberg report said officials in Caracas could award new exploration and production blocks as early as this week.
Oversupply fears that built up through 2025 now look like reality, keeping WTI prices low. The IEA’s forecast of a 3.7 million barrel-per-day surplus in 2026 is still weighing on the market. This points to a strongly bearish outlook for oil.
Trading Position Considerations
On the supply side, U.S. shale output has stayed high. Recent EIA data showed a weekly inventory build of 2.1 million barrels, adding to already large stockpiles. OPEC+ compliance has also been uneven. January data showed Russian seaborne exports up 0.7% from the prior month. Overall, supply remains heavy and the glut is not easing.
Demand is also a worry, especially as recent data suggests slower growth. China’s latest Caixin Manufacturing PMI was 50.1, only slightly above the expansion line. That signals weak factory activity, which can reduce fuel use. As the world’s largest oil importer, China’s soft demand outlook offers little support for a strong price rebound.
Geopolitics is providing limited help as well, much like last year. Ongoing U.S. diplomacy with Iran has reduced the risk premium that often lifts crude during Middle East tensions. With that support absent, the market is trading mainly on weak supply-and-demand fundamentals.
In this setting, it may make sense to position for more downside, or at least for limited upside. Buying WTI put options with strikes around $60 or lower for the next few weeks is one direct way to benefit if prices fall further. This offers strong upside if the oversupply story stays in focus.
If you expect prices to stay range-bound below current levels, selling call options or using bear call spreads with a cap near $65 may be effective. This can generate income based on the view that rallies will struggle due to excess supply. It also fits a market that lacks upward momentum.
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