WTI traded near $62.80 a barrel in the Asian session on Friday, after falling by more than 3% in the previous session. Prices stayed under pressure due to ongoing oversupply concerns.
The International Energy Agency forecast a surplus of just over 3.7 million barrels per day in 2026 and reduced its global oil demand forecast for that year. It also reported that global inventories grew in 2025 at the fastest pace since the 2020 pandemic.
Market Supply Pressure
US President Donald Trump said talks with Iran could continue for up to a month, which reduced near-term fears of supply disruption. Israeli Prime Minister Benjamin Netanyahu said Trump appeared to be working on a framework to address tensions linked to Iran’s nuclear activities.
Industry data and Reuters calculations showed Russia’s seaborne oil product exports rose 0.7% in January from December to 9.12 million metric tons. The rise was linked to strong fuel output and seasonally weaker domestic demand.
Venezuela was reported to be preparing to allocate more oil production acreage to Chevron and Spain’s Repsol. A Bloomberg report said officials in Caracas could award new exploration and production blocks as early as this week.
The oversupply concerns we saw building throughout 2025 appear to be our current reality, keeping WTI crude prices suppressed. The International Energy Agency’s forecast from last year, which predicted a massive 3.7 million barrel per day surplus for 2026, is weighing heavily on the market. This suggests that the fundamental picture remains overwhelmingly bearish for oil.
Trading Position Considerations
On the supply side, U.S. shale production has remained stubbornly high, with recent EIA data showing a weekly inventory build of 2.1 million barrels, further swelling already ample stockpiles. Furthermore, OPEC+ compliance with production cuts has been inconsistent, as January data showed Russian seaborne exports climbing 0.7% from the previous month. This continuous flow of oil onto the market confirms the supply glut is not easing.
Demand remains a significant concern, especially as recent economic data points to a slowdown. China’s latest Caixin Manufacturing PMI reading came in at 50.1, barely in expansion territory and signaling sluggish factory activity that curtails fuel consumption. This soft demand outlook from the world’s largest oil importer provides little reason to expect a significant price rally.
The geopolitical landscape also offers little support for higher prices, a situation that has persisted since last year. The diplomatic track pursued by the U.S. with Iran has effectively removed the risk premium that often inflates crude prices during times of tension in the Middle East. With this catalyst for price spikes remaining dormant, the market is left to trade on its weak supply and demand fundamentals.
Given this environment, we should consider positioning for further weakness or, at a minimum, a cap on any potential price gains. Buying WTI put options with strike prices around $60 or below for the coming weeks offers a direct way to profit from a potential slide in prices. This strategy allows for significant upside if the oversupply narrative continues to dominate headlines.
Alternatively, for those anticipating that prices will remain range-bound below current levels, selling call options or establishing bear call spreads with a ceiling around $65 could be an effective strategy. This approach generates income from the expectation that any attempt at a rally will fail due to the immense supply overhead. This capitalizes on the market’s lack of upward momentum.
