US oil prices have dropped to about $59.20, influenced by a stronger US Dollar. Geopolitical risks and OPEC+ decisions are stabilizing the market, with the focus now on the upcoming inventory report from the American Petroleum Institute (API).

Geopolitical Dynamics

Recent geopolitical events, including attacks in Ukraine targeting Russian infrastructure, have affected the operations of the Caspian Pipeline Consortium. OPEC+ plans to keep current production levels steady until early 2026, following a rise of 2.9 million barrels per day since 2025. This aims to reduce oversupply risks. At the same time, diplomatic talks between the US and Russia may lead to future supply changes. Starting in 2027, OPEC+ will evaluate each member’s production capacity, which could lead to internal conflicts. Kazakhstan and Venezuela also pose supply risks because of geopolitical tensions and US policies. The expectation of a Federal Reserve rate cut in December is helping oil prices by boosting economic activity. The chance of an easing in monetary policy has increased oil demand, with an 87% likelihood of a 25-basis-point rate cut, according to the CME FedWatch tool. WTI oil, a high-quality crude from the US, has its price shaped by global demand, political instability, OPEC actions, and the US Dollar value. Inventory reports from the API and the Energy Information Agency (EIA) impact prices, with the API providing updates every Tuesday. As of December 2, 2025, West Texas Intermediate oil prices are just below $60 a barrel. They are caught between a stronger US Dollar and various supply risks. The US Dollar Index recently reached a three-month high of 105.80, which typically makes dollar-priced commodities like oil more expensive for buyers outside the US. Therefore, we should closely watch the upcoming API and EIA inventory reports for insights into near-term demand.

Trading Strategies and Market Outlook

The geopolitical situation offers strong support for oil prices, creating chances for bullish trading strategies. Recent supply disruptions from Russia and possible sanctions on Venezuela’s 800,000 barrels per day are significant factors. This was evident in the larger-than-expected 3.1 million barrel drop in US crude inventories reported by the EIA last week. These elements suggest that buying call options or using bull call spreads could be effective strategies to take advantage of possible price spikes from any escalation. However, mixed signals indicate that volatility could present a trading opportunity. On one hand, the Federal Reserve is likely to cut interest rates, which would boost oil demand. On the other hand, a potential peace agreement between Russia and Ukraine could increase supply in the market. This current environment, similar to the sharp price fluctuations of 2022, makes strategies like long straddles or strangles appealing for traders who expect a significant price move but are unsure of the direction. From a fundamental standpoint, the pause in OPEC+ production increases for early 2026 aims to stabilize prices. The latest Baker Hughes report indicates that the number of oil rigs in the US has dropped for a third week in a row to 495, suggesting that producers are cautious about increasing output at current prices. This cautious approach supports the idea that any spike in demand could quickly tighten the market. Given these conditions, simple directional bets could be risky in the upcoming weeks. It may be wise to use options to manage risk, such as buying call spreads aimed at a move into the low-$60s while remaining prepared for downside risks. Buying protective puts could be smart if diplomatic efforts in Eastern Europe gain unexpected success, as an increase in global supply could push prices down. Create your live VT Markets account and start trading now.

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