West Texas Intermediate (WTI) Oil prices have dropped, trading around $65.50 during European hours. Ongoing trade tensions are raising worries about demand, which is negatively impacting the market. Market players are cautious as the US President’s August tariff deadline approaches. The US is in talks with the EU, with a potential 30% tariff on EU exports being discussed while the EU considers its countermeasures.

Indonesia US Contract

An $8 billion contract between Indonesia’s Danantara and the US engineering firm KBR Inc. affects tariff adjustments. A ceasefire between Israel and Iran, along with Saudi Arabia ramping up exports in May, has helped ease supply pressures, which impacts prices. WTI Oil is a key type of crude, known for its light and sweet quality. It’s refined in the US and serves as a market benchmark, with its prices influenced by supply, demand, and geopolitical events. Oil inventory data plays a crucial role in setting WTI prices, changing with supply and demand. OPEC’s production quotas also impact supply and pricing decisions, affecting the global market.

Positioning For Further Downside

Given the current situation, we anticipate that crude prices may go lower in the coming weeks. The ongoing trade tensions, especially the unresolved talks between the US and the EU, significantly strain demand forecasts. Recent Purchasing Managers’ Index (PMI) data from the Eurozone indicates a slowdown in manufacturing, suggesting energy consumption may decline. To prepare for further declines, we are buying put options, which benefit from falling prices. The easing of supply pressures from the ceasefire and increased Saudi exports weakens market support. The latest OPEC+ meeting hinted at a potential increase in supply starting in the fourth quarter, which adds to the bearish outlook. For traders with a more cautious stance, we recommend selling out-of-the-money call spreads. This strategy allows you to collect premium while keeping risks low. During the 2018 trade war, WTI prices plummeted over 30% within a quarter as fears of a global slowdown grew. Current oil market volatility, as indicated by the OVX index, is rising, making options strategies more appealing than simply holding short positions. We will closely watch the weekly inventory reports from the Energy Information Administration for confirmation. A recent report revealed an unexpected increase in US crude stockpiles of 1.2 million barrels when a decrease was expected, indicating that demand may already be weakening. If there are further stock increases in the upcoming weeks, it could trigger a significant price drop. Create your live VT Markets account and start trading now.

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