Insights 
VT 
The US administration has imposed sanctions on Russia’s major oil companies, Rosneft and Lukoil, accusing Russia of not being committed to ending the conflict in Ukraine. This action occurs shortly after delaying a summit between US President Donald Trump and Russian President Vladimir Putin.
As a result of these sanctions, the West Texas Intermediate (WTI) oil price increased by 4.03%, reaching $59.88. WTI Oil is a well-known type of crude oil, distinguished by its low sulfur content and used globally as a benchmark for oil prices.
Factors Affecting WTI Oil Prices
Several factors affect WTI Oil prices, including global supply and demand dynamics, geopolitical tensions, and actions by OPEC. The US Dollar’s value also plays a role, as a weaker dollar can make oil cheaper.
Weekly oil inventory reports from the American Petroleum Institute (API) and the Energy Information Agency (EIA) provide insights into supply and demand shifts, influencing WTI Oil prices. OPEC, a group of 12 oil-producing nations, affects prices through production decisions, with lowered quotas raising prices and increased production lowering them.
We are seeing a familiar pattern emerge in the oil market, reminiscent of the sanctions imposed during the Trump administration. The new restrictions on Russian oil companies create an immediate supply-side risk. Traders should view this not as an isolated event, but as a continuation of geopolitical tensions that have driven energy markets since the full-scale invasion of Ukraine in 2022.
The market has reacted quickly, with WTI crude futures jumping to trade around $92.50 per barrel, a significant move from the low $80s seen just last month. This price action signals that traders are pricing in a prolonged disruption to global supply. Volatility is expected to increase substantially in the coming weeks.
Trading Strategies in Volatile Markets
For derivative traders, this suggests a bullish stance on crude oil prices through the end of the year. Buying call options with strike prices at $95 and $100 for December delivery is a direct strategy to capitalize on expected upward momentum. The current market shows a clear break from the recent range-bound trading.
This view is supported by the latest Energy Information Administration (EIA) data, which showed a surprise crude inventory draw of 3.2 million barrels last week. Analysts had expected a small build, so this tightening of US stockpiles adds fuel to the bullish sentiment. This confirms underlying demand remains robust even as supply is threatened.
We also have to consider the position of OPEC+, which just last month agreed to maintain its existing production cuts into the first quarter of 2026. With the cartel holding supply tight, these new sanctions on a major non-OPEC+ producer will likely amplify the supply deficit. This creates a strong floor for prices and limits downside risk for long positions.
However, a key factor to watch is the strength of the US dollar. The Dollar Index (DXY) has been hovering around a high of 106.5, which can act as a headwind for oil prices by making crude more expensive for holders of other currencies.
Given the elevated implied volatility, traders could also consider bull call spreads to lower the upfront cost of entry while still maintaining upside exposure. This strategy helps manage risk in what will certainly be a choppy trading environment. We should monitor the weekly inventory reports from API and EIA very closely for any signs of demand destruction.
