WTI crude oil is trading slightly lower after reaching a two-week high last Friday. Geopolitical tensions may limit Russia’s oil supply, supporting prices. The US Federal Reserve’s potential rate cut is putting pressure on the US Dollar, which helps stabilize oil prices. WTI crude is trying to maintain a three-week uptrend, staying just under $60.00, with a minor decline of less than 0.10% on Monday.

Effects of Geopolitical Changes

The G7 and EU are discussing replacing the current price cap on Russian oil with a maritime services ban. This change could affect Russia’s oil exports and, along with stalled peace talks between Russia and Ukraine, could help keep oil prices steady. Anticipated Fed rate cuts may weaken the US Dollar, benefiting dollar-priced commodities like crude oil. However, worries about a possible global oil surplus in 2026 may limit price increases. OPEC’s recent report suggests that global oil supply could exceed demand by 2026 due to increased output from OPEC+ members. Rising US crude inventories are also putting a damper on price rises. The breakout above the 50-day Simple Moving Average last Friday is a positive signal, making any price dip a good buying opportunity. Overall, the trend suggests WTI crude oil may rise despite supply concerns.

Market Strategies and Fed Activities

With WTI crude oil near $60, there are mixed signals indicating possible volatility ahead. Geopolitical tensions, especially the potential maritime services ban on Russian oil, provide support for prices and limit downside risk for now. We need to keep an eye on possible new actions by the G7 and EU against Russian exports in the coming weeks. Recently, Russian seaborne crude exports fell by about 400,000 barrels per day in November 2025, as per the latest tanker tracking data. Any official announcement of a ban could significantly reduce supply and raise prices. The expectation of another Federal Reserve interest rate cut this week is adding to upward pressure on prices. The CME FedWatch Tool shows a greater than 85% chance of a 25-basis-point cut, which would further weaken the US dollar. A weaker dollar generally makes oil cheaper for those using other currencies, potentially increasing demand. Yet, renewed concerns about a supply surplus in 2026 are capping prices. OPEC’s latest monthly report indicates that global supply could outpace demand by more than 1.2 million barrels per day by mid-next year if production rises as expected. This long-term bearish view is making some traders cautious. Additionally, rising US crude inventories are affecting market sentiment. Last week’s report from the Energy Information Administration (EIA) revealed an unexpected increase of 2.4 million barrels, which contrasts with the usual year-end trend of declining inventories. This situation echoes what happened in late 2023, when consistent inventory increases stifled price rallies. In light of this uncertainty, trading strategies should focus on volatility instead of a single direction over the next few weeks. Options traders may want to consider straddles or strangles with expirations in January or February 2026, aiming to profit from significant price movements stemming from the Fed meeting or new geopolitical events. The technical breakout above the 50-day moving average suggests that buying on dips may be a good short-term approach, but the supply outlook calls for caution. Create your live VT Markets account and start trading now.

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