Insights 
VT 
The price of West Texas Intermediate (WTI) oil climbed to approximately $61.45 during the Asian session on Monday. This rise follows progress in trade talks between the US and China, fostering optimism for better oil demand. The American Petroleum Institute’s weekly crude oil stock report is anticipated on Tuesday.
The preliminary trade agreement between the US and China is expected to halt new tariffs and ensure rare earth mineral supplies continue flowing to the US. A meeting between US President Trump and Chinese President Xi Jinping is scheduled for later this week, potentially defusing trade tensions and supporting global economic growth.
Impact Of US Sanctions On Russian Oil
The US recently imposed sanctions on Russia’s Rosneft and Lukoil, impacting more than 5% of global oil production. With Russia being the second-largest oil producer after the United States, these sanctions could curtail its crude exports, tightening global supply and affecting WTI prices.
Factors affecting WTI oil prices include supply and demand dynamics, political events, and currency value changes. Inventory reports and decisions by OPEC also influence prices. OPEC and allies have increased oil supply forecasts, predicting a potential surplus in the coming years.
With WTI crude oil currently trading near $61.50, we are seeing a classic setup of bullish sentiment clashing with bearish fundamentals. The preliminary US-China trade agreement is the primary driver of optimism, as it signals a potential rebound in global energy demand. We saw a similar pattern back in late 2019 when progress on the “Phase One” trade deal helped push oil prices up by over 10% in the fourth quarter.
Recent Data On Oil Inventories
The new sanctions on Russia’s Rosneft and Lukoil add a significant supply-side risk premium that cannot be ignored. When major sanctions were placed on Russia’s energy sector in 2022, we saw Brent crude spike to nearly $140 per barrel, so the potential for a sharp upward move is historically validated. Traders should position for increased volatility, as any escalation could quickly remove millions of barrels from the global market.
However, the upside may be limited by OPEC+ intentions to increase supply into 2026, a move aimed at reclaiming market share. Recent data from the EIA shows global oil inventories have built by approximately 0.5 million barrels per day this year, supporting the view that a supply surplus could cap any major price rallies. This supply overhang suggests that selling call options at higher strike prices, perhaps around the $68-$70 level, could be a prudent strategy to hedge long positions.
In the immediate weeks, all eyes should be on the upcoming API and EIA inventory reports and the pivotal Trump-Xi meeting. A larger-than-expected crude drawdown could combine with positive trade news to push WTI firmly above $65. Derivative traders might consider strategies like bull call spreads to capitalize on a potential short-term rally while limiting risk from the bearish supply outlook.
