West Texas Intermediate (WTI) crude oil prices are falling due to concerns about global supply. Currently, WTI is trading below $65, with daily losses of over 1.50%. The U.S. decision to restore Chevron’s license to operate in Venezuela is affecting the market. This move could lead to Venezuela exporting oil again, but because of infrastructure challenges, any immediate gains are likely to be small.

Venezuelan Oil and Global Supply

Venezuela has the largest crude oil reserves in the world, and a recovery there could influence global supply. Together with planned output increases from OPEC+, worries about oversupply are growing. OPEC+ plans to increase production by 548,000 barrels per day in August, with another rise expected in September. This potential oversupply is dampening positive news, such as stronger economic data. WTI prices have dropped below the 50-day Simple Moving Average of $65.44, testing important support levels. The Relative Strength Index (46) suggests weakening momentum, indicating heightened downside risks due to supply concerns. WTI is sourced in the U.S. and traded globally, serving as a key benchmark in the oil market. Factors that drive WTI prices include global supply and demand trends, OPEC decisions, and changes in the value of the U.S. dollar.

Crude Oil Inventory Reports and Market Volatility

Reports from the American Petroleum Institute and the Energy Information Agency (EIA) also affect WTI pricing. Changes in oil inventory levels reflect shifts in supply and demand, which impact prices. Recently, although WTI was trading significantly higher at around $78 a barrel, it still shows substantial global supply uncertainty and rising fears about declining demand. The fundamental issues discussed remain important for traders. The outlook on planned output increases has changed, as OPEC+ has extended its production cuts of 2.2 million barrels per day until the third quarter of 2024. Typically, such cuts would boost prices, but the market’s weak reaction indicates traders are more concerned about a potential economic slowdown, particularly in China. This suggests we should be careful about expecting a lasting rally based solely on supply adjustments. The license renewal for operations in Venezuela is a long-term factor to watch. Venezuelan production has slowly climbed to just over 900,000 barrels per day, which is a small fraction of its capacity and not enough to immediately impact global balances. We see this as a gradual headwind rather than an immediate threat to prices. We need to focus on weekly inventory reports for short-term trading indicators. For instance, a recent EIA report showed an unexpected increase in U.S. commercial crude inventories of 1.2 million barrels, contradicting analysts who expected a decrease. These numbers will likely cause volatility and open opportunities for agile traders. With WTI struggling around the $80 mark, this level is now a significant psychological and technical resistance point. The declining momentum shown by the Relative Strength Index indicates that downside risks are likely. We believe that bearish option strategies, like buying puts, could be an effective way to hedge or bet on further price declines in the coming weeks. Create your live VT Markets account and start trading now.

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