West Texas Intermediate (WTI) crude oil dropped to $56.82 per barrel early on Monday during the European session, down from $57.24 on Friday’s close. Meanwhile, Brent crude remained steady around $61.25.

WTI, or West Texas Intermediate, is a light and sweet crude oil with low gravity and sulphur content, making it easy to refine. It is predominantly sourced from the US and the price, often quoted in media, acts as a benchmark for the crude oil market.

Factors Influencing WTI Prices

Supply and demand steer the price of WTI, with factors such as global economic growth, political instability, and the decisions of OPEC affecting its cost. The US dollar’s value also affects WTI prices, as oil is traded in this currency.

Weekly oil inventories from the American Petroleum Institute (API) and Energy Information Agency (EIA) influence WTI prices. Decreasing inventories might suggest a demand rise, raising prices, while increasing inventories can indicate more supply, pushing down prices.

OPEC, consisting of twelve oil-producing nations, influences WTI oil prices through production quotas. Changes during their biannual meetings can constrict or expand supply, affecting prices accordingly. The expanded OPEC+ includes ten non-OPEC members, like Russia.

With West Texas Intermediate crude oil opening the week on a bearish note at $56.82, we are seeing immediate pressure driven by signs of weakening global economic health. The price drop reflects growing concerns that demand will not keep pace with supply in the coming months. This sentiment is a key factor for traders to watch closely.

The demand picture has been clouded by recent economic data from major consumers. For instance, China’s third-quarter GDP growth for 2025 was reported at 3.9%, missing the 4.4% forecast and signaling a significant slowdown in its recovery. This, combined with Germany’s industrial production contracting for a second consecutive quarter, points to a sluggish demand outlook from both Asia and Europe.

On the supply side here in the US, we’ve seen commercial crude inventories build unexpectedly over the past three weeks. Last Wednesday’s Energy Information Administration (EIA) report showed a build of 2.1 million barrels, while analysts had predicted a small draw. This consistent surplus suggests that current production levels are outpacing consumption, putting a natural cap on any price rallies.

Market Outlook and Strategies

Looking ahead, we see the U.S. Dollar Index (DXY) remaining strong, hovering around 107.5, as the Federal Reserve has signaled it will hold interest rates steady through the end of 2025 to combat lingering inflation from the 2022-2024 period. A strong dollar makes oil more expensive for holders of other currencies, which typically dampens global demand. This currency headwind is likely to persist through the fourth quarter.

Given these dynamics, traders should prepare for continued price weakness, but also be wary of sudden shifts from OPEC+. While the current trend is bearish, there are whispers that the group may convene an emergency meeting if prices fall below $55, much like they did back in 2023 to stabilize the market. Therefore, buying put options to hedge against further downside while selling covered calls to generate income in what may become a range-bound market could be a prudent strategy.

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