Oil prices have gone up as the US Congress moves forward with a funding bill to end the government shutdown. This is helping the oil market recover. West Texas Intermediate (WTI) US Oil is trading at around $60.75 per barrel, which is a rise of 1.20% on Tuesday. The optimism about reopening the US government is driving this increase, as it is likely to boost economic activity. The US Senate passed a temporary funding bill with a 60-40 vote, raising hopes that the budget deadlock will come to an end. This is expected to lead to a short-term increase in energy demand as federal operations restart. However, oil supply remains high, with US inventories growing for the fourth week in a row, and Asian floating storage has doubled since October.

Global Oil Benchmarks

Global crude oil benchmarks have dropped about 15% since mid-September. This is due to higher production from non-OPEC countries and slower oil demand from China. OPEC+ plans to increase its output by 137,000 barrels per day in December, pausing further increases in early 2026 to stabilize the market. WTI is also benefiting from a weaker US Dollar, especially amid job loss reports that raise expectations for more monetary easing. Upcoming reports from OPEC, API, and the US Energy Information Administration will provide fresh insights into oil market conditions. The oil market is facing mixed signals, making it a challenging environment for traders. WTI crude is currently priced around $60.75, buoyed by hopes that ending the US government shutdown will boost economic activity and oil demand. However, the ongoing oversupply issue is keeping prices in check. The potential for higher prices depends on renewed demand and a weaker US dollar, which makes oil cheaper for international buyers. Last week, the Energy Information Administration (EIA) reported a surprising decrease of 1.5 million barrels, breaking a four-week inventory growth streak and giving buyers some encouragement. This suggests that the demand increase from the government’s reopening may be showing up in the data sooner than expected.

Potential Market Strategies

However, we cannot overlook the oversupply that has caused prices to fall by 15% since mid-September. Slower demand from China is a concern, but recent reports show China’s manufacturing PMI for October at 50.2, indicating a slight and unexpected return to growth. This could mean that demand from Asia might be improving, which could change the supply-demand balance. Given the current uncertainty, traders using derivatives should prepare for increased volatility in the coming weeks. Instead of making straightforward bets, strategies like buying straddles could help profit from significant price changes, regardless of the direction, before the next OPEC+ meeting in December. For those who are optimistic but want to manage their risk, bull call spreads can offer a clear way to take advantage of a potential price rise. Historically, after the 2018-2019 government shutdown, WTI prices gradually recovered in the following months as the economy stabilized. While each market behaves differently, this history suggests that resolving US fiscal uncertainty could provide a price floor. Therefore, the immediate focus should be on the upcoming weekly API and EIA inventory reports to determine if last week’s demand spike was just temporary or the beginning of a new trend. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now