The price of West Texas Intermediate (WTI) Crude Oil is increasing as there is hope that the US government shutdown will be resolved soon. Bloomberg reports that moderate Senate Democrats are in favor of a deal to fund key US departments for a year, which could lead to higher Oil demand. WTI Oil is trading around $60.00 per barrel and is rising due to geopolitical tensions and ongoing US sanctions on Russia’s Rosneft and Lukoil. These factors could push countries like China and India, which depend on Russian Oil, to look for alternative sources.

The Impact of US Government Shutdown

The US government shutdown may soon come to an end, with tentative agreements to ensure federal workers receive back pay and state federal transfers can resume. Still, the crude oil market is facing challenges from increased output by OPEC+ and non-member producers, raising concerns about oversupply. WTI Oil, a high-quality crude from the US, is influenced by supply and demand, political events, and decisions made by OPEC. Price changes are also affected by the US Dollar’s value. Weekly reports from the American Petroleum Institute and the Energy Information Administration are key in shaping WTI Oil prices. OPEC’s production choices directly affect WTI Oil’s availability and pricing. Lower quotas can lead to price increases, while increased production usually results in lower prices. Currently, WTI is holding around $85 per barrel, a big change from the $60 level seen during past significant government shutdowns. The focus has shifted from politics to the overall health of the economy, especially with signs of a slowdown, making demand a key concern in the coming weeks.

Focus on Supply Discipline

Fears of a global oversupply, which arose when OPEC+ expanded production in the past, have now shifted to an emphasis on supply discipline. OPEC+ has recently agreed to extend its voluntary cuts of 2.2 million barrels per day until early 2026, citing a weak global demand outlook. This commitment to tighter supply helps support prices, but traders may doubt their commitment if demand weakens further. The market has adjusted to the ongoing sanctions on Russian oil companies, a situation that traders have been watching for years. Significant importers like India and China have developed new supply channels, though Russian seaborne exports have remained strong, averaging around 3.4 million barrels per day in recent months. The main risk now lies with potential enforcement actions or changes to the price cap system, which could disrupt these established trade flows. In the short term, it’s essential to monitor inventory data, as it reflects the current supply-demand balance. The latest Energy Information Administration (EIA) report surprised many with an inventory increase of 1.5 million barrels, contrary to expectations of a decrease. This suggests that, despite OPEC+ cuts, short-term demand in the US may be weaker than expected, which could limit any significant price increases. Create your live VT Markets account and start trading now.

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