West Texas Intermediate (WTI), the benchmark for US crude oil, is trading around $60.70 as of Wednesday’s Asian session. The price drop follows Venezuela’s return to oil exports and a reported rise in US crude inventories from the American Petroleum Institute (API).

Venezuela’s Oil Production Resumes

According to Reuters, Venezuela is boosting oil production after previously cutting it due to a US embargo. Recently, two supertankers, each carrying about 1.8 million barrels of crude oil, set sail. This may be part of a 50-million-barrel supply deal between Caracas and Washington to restart exports. On the US side, crude stockpiles have increased significantly. The API’s weekly report indicate an uptick of 5.27 million barrels for the week ending January 9, contrasting with a drop of 2.8 million barrels the week prior. Market expectations had anticipated a decrease of 2.0 million barrels. Adding to WTI price pressures, tensions are rising in Iran. President Trump has pulled out of meetings with Iranian officials and is supporting protesters, as reported clashes have resulted in casualties. With WTI crude oil priced at around $60.70, we see significant downward pressure. The unexpected increase of 5.27 million barrels in US stockpiles is a major bearish signal, especially since the market expected a decline. Traders are now looking forward to the official EIA report later today, which is likely to confirm the trend of rising inventories.

Implications for Traders

The current supply surplus is compounded by new barrels entering the market from two sources. In the US, crude production is at record highs, with the latest EIA forecasts suggesting output may average over 13.5 million barrels per day this quarter. Additionally, the restart of Venezuelan exports adds an unexpected variable that the market hadn’t accounted for until this week. On the demand front, concerns about the global economy’s strength could impact oil consumption. December 2025’s manufacturing PMI data from China showed a slight contraction, indicating weaker demand from the world’s largest oil importer. This poor demand outlook, combined with climbing supply, points to lower prices in the near future. For traders in derivatives, this environment appears to favor bearish positions. There has been a noticeable rise in open interest for put options with strike prices at $58 and $55 for the February and March contracts. Strategies such as buying puts or creating bear put spreads could help capitalize on potential price drops toward the mid-$50s. Nevertheless, we must keep an eye on the ongoing geopolitical tensions in Iran. Any escalation or direct US intervention could lead to a sudden supply shock, causing prices to surge and hurting short positions. Holding some inexpensive, out-of-the-money call options could be a cost-effective way to hedge against this unpredictable risk. Create your live VT Markets account and start trading now.

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