West Texas Intermediate (WTI) has recently stabilized around $62.00 after a decline. The Organisation of the Petroleum Exporting Countries Plus (OPEC+) has rejected rumors of a major production increase, opting for a smaller rise of 137,000 barrels per day (bpd) starting in October. Speculation grew after Bloomberg reported that OPEC+ might significantly increase production starting in November, which could negatively affect oil prices.

Impact Of Potential US Government Shutdown

Fears of a possible US government shutdown are also affecting the oil market, as it might lead to reduced public spending and lower oil demand in the US. The US Energy Information Administration (EIA) will release its weekly crude oil stockpiles data on Wednesday at 14:30 GMT. This data could influence oil prices further. WTI is an important benchmark for crude oil trading, appreciated for its easy refining process and quality. Its price is shaped by various external factors, including the US Dollar’s strength, geopolitical tensions, and OPEC+ decisions. Currently, WTI is trading near $85 a barrel, compared to the previous $62 support level. This shift reflects not only OPEC+’s minor production increase of 137,000 bpd and the potential government shutdown but also broader concerns about a global economic slowdown impacting demand.

Changes In OPEC Production Strategy

The supply situation has changed greatly since then. OPEC+ is now implementing significant production cuts, with major members sustaining voluntary reductions totaling over 2.2 million bpd to support prices. This approach contrasts with the earlier minor increase discussed when WTI was lower. The latest EIA data showed a surprise inventory build of 1.5 million barrels, heightening concerns about falling demand. This data is particularly important now, especially alongside the recent weak manufacturing PMI figures from both China and Germany. Traders should keep an eye out for additional signals of reduced demand. Given the tension between OPEC+’s constrained supply and weakening demand, we anticipate continued volatility in the coming weeks. Options traders may want to consider strategies that capitalize on this uncertainty, such as purchasing puts to protect against a potential drop below the $80 support level. Selling covered calls against long positions could also help generate income while offering some downside protection. Create your live VT Markets account and start trading now.

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