WTI Crude Oil prices dropped sharply below $60.00 per barrel, falling over 4%. This is the largest decline in a single day since June. The drop was caused by disappointment over potential tariff easing between the US and China, along with the ongoing US government shutdown. US President Trump announced he won’t attend a trade meeting with Chinese President Xi Jinping and hinted at imposing more tariffs on Chinese goods. In response, China tightened its export controls on rare earth materials, which now require an export license. Trump criticized this action and saw no value in further trade talks at the upcoming Asia-Pacific Economic Cooperation summit.

Impact of Tariff Threats on the Market

Donald Trump’s threats regarding tariffs have hurt market sentiment, particularly as the administration struggles to pass a federal funding bill. West Texas Intermediate (WTI) oil, a high-quality crude oil traded globally, is highly sensitive to supply, demand, and OPEC’s production decisions. Weekly data from the API and EIA is crucial in evaluating WTI oil prices. Lower inventories may indicate increasing demand, while higher inventories suggest excess supply. Decisions made by OPEC and OPEC+ greatly affect prices, with production cuts usually leading to price increases. Understanding these factors is essential for analyzing WTI market trends and trading strategies. WTI crude is having difficulty maintaining the $72 per barrel mark, reminiscent of sharp declines observed during the US-China trade disputes in the late 2010s. Current trade tensions, particularly regarding green technology subsidies, create risks that negatively impact investor sentiment. The market is reacting more to political statements than to actual supply and demand figures. The latest forecast from the IMF predicts global growth will slow to 2.7% by 2026, raising concerns about weakening energy demand. Additionally, there is a long-term trend to consider; electric vehicle sales comprised over 22% of all new car sales in the third quarter of 2025, putting a structural limit on oil prices. This suggests that any price increases may be short-lived and face selling pressure.

Supply and Inventory Overview

On the supply front, the latest report from the Energy Information Administration (EIA) revealed a surprising increase in crude inventories of 3.1 million barrels, indicating dwindling demand. This comes after OPEC+ chose to maintain steady production levels last month, a move the market deemed insufficient to avoid a supply surplus. The combination of rising inventories and stable production puts prices at risk of further declines. In this bearish market, derivative traders should think about buying put options to safeguard against a drop below the $70 support level. Additionally, selling out-of-the-money call options with strike prices around $78 could be a wise move to generate income, as a large price surge appears unlikely. These strategies are designed to benefit from either a continued price decline or a period of limited trading range. We anticipate increased volatility in the upcoming weeks, offering opportunities for traders to use options straddles to profit from significant price swings in either direction. The current pattern of strong statements from government officials mirrors market conditions from 2019, where tweets and announcements could wipe out a week’s gains in a single session. As a result, traders need to be prepared for sudden market changes based on diplomatic news. Create your live VT Markets account and start trading now.

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