WTI Oil is down nearly 3% for December and has dropped close to 20% over the year. The current price is about $57.70 per barrel, falling after some brief gains earlier this week. This decline continues as expectations rise for an oil surplus. Higher production from OPEC+ and non-OPEC sources, combined with slow demand growth, contribute to this trend. Key factors influencing WTI prices include supply and demand, political instability, and global economic conditions.

Impact Of Political Events On Oil Prices

Political issues, such as recent attacks on Russian President Putin’s home and Saudi air strikes in Yemen, create uncertainty in the market. Russia claims Ukraine is provoking them, while decisions from OPEC about production also play a significant role. The American Petroleum Institute and the Energy Information Agency release weekly reports on oil inventories, affecting WTI prices based on supply and demand changes. A drop in inventories can signal higher demand, raising prices, while an increase suggests more supply, which can lower prices. OPEC, along with its larger group OPEC+, impacts WTI prices through production quotas. Adjustments to these quotas can either tighten or ease supply, influencing oil prices. OPEC typically meets twice a year to make these decisions, affecting global oil markets. WTI crude oil is projected to end 2025 down nearly 20% and trading below $58. The market is currently over-saturated. Recent data from the U.S. Energy Information Administration (EIA) shows domestic production near a record 13.3 million barrels per day in the fourth quarter. Strong non-OPEC output, along with steady OPEC+ production, suggests prices will likely remain low as we enter the new year.

Demand Projections And Geopolitical Risks

Demand projections do little to help prices recover. The International Energy Agency (IEA) earlier in 2025 predicted a significant slowdown in global demand for 2026, dropping to under 1 million barrels per day. This reflects ongoing economic struggles and a move towards energy efficiency, indicating the oil surplus might grow in the coming months. However, geopolitical risks could lead to sharp and unpredictable price changes. Renewed tensions between Russia and Ukraine, plus instability in the Middle East, add significant risk that could impact short positions. Looking back to the price shock from the 2022 conflict shows how quickly market sentiment can shift due to a single news story. With weak fundamentals and high event risk, traders should consider strategies that profit from further price drops or sideways movement while limiting potential losses. Buying put options offers a clear bet on falling prices with a set risk, providing a way to position for a drop to the low $50s. For those who think prices will remain steady or decline slightly, selling out-of-the-money call spreads can be a smart way to earn premium. Going forward, keeping an eye on weekly inventory reports is essential for signs of market balance. A surprising drop in EIA stockpiles could briefly support prices, while another large increase, like the 3.6 million barrel rise reported earlier this month, would strengthen the negative outlook. These numbers will be crucial for short-term trading choices in early 2026. Create your live VT Markets account and start trading now.

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