WTI Oil is facing a slight weekly loss after three weeks of gains, currently trading at around $58.80. This comes after a decrease in tensions between the US and Iran and lower geopolitical risks. Recently, the US seized another oil tanker linked to Venezuela ahead of a meeting between Trump and Machado, which is part of efforts to enforce sanctions on shipments.

Signs Of Market Stability

Recent events have eased worries about conflicts affecting Iranian oil production. The US has held off on military action after receiving assurances that Iran would stop executions. Reports indicate that regional allies advised the US to postpone any actions, reducing immediate market fears. However, some risks still exist in the short term, keeping the market vigilant. A report by Shell on Energy Security Scenarios for 2026 indicates a positive long-term outlook for energy demand and oil growth. It predicts significant energy needs by 2050, while also suggesting a healthy oil supply this year, despite OPEC’s earlier forecasts for more balance in the market. WTI Oil, as a market benchmark, is influenced by supply and demand, political instability, and the value of the US Dollar. Decisions made by OPEC can greatly affect prices, especially when production quotas adjust supply levels. Weekly inventory reports from the API and EIA offer insight into the changing dynamics of supply and demand, impacting oil prices. With the immediate risk of a US-Iran military conflict fading, the geopolitical risk that previously elevated crude oil prices has subsided. The WTI price, now under $59, shows that the market is not anticipating a major supply disruption from the Strait of Hormuz. This represents a shift back to focusing on market fundamentals instead of headline risks. The noticeable drop in perceived risk is reflected in the CBOE Crude Oil Volatility Index (OVX), which has declined from over 40 to nearly 30 in just two weeks. For derivative traders, this change indicates that selling options for premiums is becoming a more effective strategy. We believe that strategies like short straddles or strangles could yield profits if oil prices stabilize.

Supply And Demand Dynamics

A bearish outlook is supported by solid supply data, as U.S. crude production remains close to a record 13.3 million barrels per day. The latest EIA report revealed an unexpected inventory increase of 2.1 million barrels, signifying that supply is abundant. These factors pose a significant challenge to any potential price rally in the upcoming weeks. Last year, concerns about diminished supply due to OPEC+ cuts kept prices elevated for a large portion of the second half. Currently, the focus has shifted to signs of slowing global demand and strong non-OPEC production. This contrasts with the supply concerns that were a major topic last year. However, we shouldn’t get too relaxed, as the seizure of the Venezuelan tanker illustrates that geopolitical tensions still play a role. Although the situation with Iran has calmed, smaller events can still trigger short-term price surges. Therefore, purchasing inexpensive, out-of-the-money call options could provide a low-cost safeguard against any unexpected escalations. Create your live VT Markets account and start trading now.

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