West Texas Intermediate (WTI) oil prices saw a decrease early in the European session on Thursday, with WTI trading at $57.95 per barrel, down from $58.77 the previous day. Brent crude oil also experienced a decline, trading at $61.62 compared to its previous close of $62.46.
WTI oil, known for its low gravity and sulfur content, is sourced in the US and is a major benchmark on the oil market. Its price is affected by supply and demand, geopolitical events, and the US Dollar’s value, as oil is predominantly traded in US Dollars.
Impact Of Weekly Oil Reports
The American Petroleum Institute (API) and the Energy Information Agency (EIA) publish weekly oil inventory reports which impact WTI oil pricing. A drop in inventories can indicate increased demand and raise prices, while higher inventories may reflect increased supply, pushing prices down.
OPEC, comprising 12 oil-producing countries, influences WTI oil prices by adjusting production quotas during their meetings. Lowering quotas can raise oil prices by tightening supply, while increasing production can have the opposite effect. The expanded OPEC+ group includes additional countries, notably Russia.
The drop in WTI to below $58 a barrel today makes sense when we look at the latest numbers. The Energy Information Administration (EIA) report yesterday showed a surprise build in crude inventories of 3.6 million barrels, against expectations of a draw. This suggests that for now, supply is outpacing demand in the United States.
We also have to consider the OPEC+ decision from their meeting two weeks ago. Their agreement on voluntary cuts of 2.2 million barrels per day has been met with skepticism, as the market questions whether all members will fully comply. We saw a similar situation back in late 2023, where doubts about voluntary cuts kept a lid on prices despite the official announcement.
Demand Side Challenges
On the demand side, things look soft as we head into 2026. Recent manufacturing PMI data out of China has contracted for the third consecutive month, signaling a slowdown in the world’s largest oil importer. This aligns with weaker economic forecasts for Europe, painting a picture of sluggish global growth.
The strength of the US Dollar is another major headwind for us. With the Dollar Index holding firm above 105, oil becomes more expensive for buyers using other currencies, which can dampen demand. This currency pressure will likely continue weighing on prices in the coming weeks.
Given this bearish environment, we should consider buying put options to protect against further downside, especially with WTI breaking below the key $60 support level. For those expecting volatility to pick up around year-end without a clear direction, setting up straddles could be a prudent move. The current market shows implied volatility isn’t overly expensive, presenting a good entry point.
Looking ahead, the weekly inventory reports from the API and EIA next Tuesday and Wednesday will be critical to watch for signs of this supply glut easing. We also need to keep an eye on any statements from the Federal Reserve, as their interest rate policy is directly impacting the dollar’s strength.
