WTI crude oil trades with a slight negative bias, easing from an over two-week high reached last Friday. Despite this, geopolitical tensions could restrict Russia’s oil supply, offering support to prices.
The US Federal Reserve’s expected rate cut maintains pressure on the US Dollar, helping prevent larger losses for oil. WTI crude oil prices attempt to sustain a three-week uptrend, hovering just below the $60.00 mark, with a slight decrease of less than 0.10% on Monday.
Impact of Geopolitical Developments
Discussions are underway among the G7 and EU about replacing the current price cap on Russian oil with a maritime services ban. This move could impact Russia’s oil exports and, alongside stalled Russia-Ukraine peace talks, supports oil prices.
Expectations of a Fed rate cut depress the US Dollar, potentially benefiting dollar-denominated commodities, including crude oil. However, concerns over an anticipated global supply surplus in 2026 may limit gains.
OPEC’s recent report suggests global oil supply may overtake demand by 2026 due to higher expected output from OPEC+ members. Rising US crude inventories also pose constraints on price increases.
The 50-day Simple Moving Average breakout last Friday offers a bullish signal, making any price dip a potential buying opportunity. The overall trend favours an upward movement for WTI crude oil, despite supply concerns.
Market Strategies and Federal Reserve Actions
With WTI crude oil sitting just below $60, we are seeing conflicting signals that suggest a period of volatility ahead. Geopolitical tensions, particularly the threat of a full maritime services ban on Russian oil, are providing a floor under prices. This uncertainty limits downside risk for now.
The potential for new G7 and EU actions against Russian exports is a significant factor we must watch in the coming weeks. We’ve already seen Russian seaborne crude exports drop by about 400,000 barrels per day in November 2025, according to the latest tanker tracking data. Any formal announcement of a ban would sharply curtail supply and could send prices higher.
Adding to the upward pressure is the expectation of another Federal Reserve interest rate cut this week. The CME FedWatch Tool is currently pricing in an over 85% probability of a 25-basis-point cut, which would further weaken the US dollar. A softer dollar generally makes oil more affordable for holders of other currencies, which can boost demand.
However, a cap on prices comes from renewed fears of a supply surplus heading into 2026. OPEC’s latest monthly report projects that global supply could exceed demand by over 1.2 million barrels per day by the middle of next year if production increases as planned. This long-term bearish outlook is causing some traders to hesitate.
We also have to consider the rising US crude inventories, which are weighing on sentiment. Last week’s report from the Energy Information Administration (EIA) showed a surprise build of 2.4 million barrels, which goes against the typical year-end trend of inventory draws. This pattern is reminiscent of late 2023, when consistent inventory builds prevented prices from sustaining any rally.
Given this push and pull, derivative strategies should focus on volatility rather than a single direction over the next few weeks. Options traders might consider straddles or strangles with expirations in January or February 2026 to profit from a significant price move in either direction following the Fed meeting or new geopolitical headlines. The technical breakout above the 50-day moving average suggests buying on dips might be the preferred short-term tactic, but the fundamental supply picture warrants caution.
