West Texas Intermediate (WTI) oil prices have slipped to approximately $59.60 per barrel due to oversupply concerns highlighted in an ING report predicting a surplus through 2026. Goldman Sachs estimates an ongoing surplus of approximately 2 million barrels per day due to increased production, which could affect oil prices in the coming years.
OPEC and non-OPEC producers continue to boost output while demand growth slows. OPEC+ has approved a 137,000 barrels per day increase in production for December, following similar hikes for October and November, with no further increases planned in early 2025.
Geopolitical Tensions And Effects
Prices also came under pressure when Russia’s Novorossiysk port resumed operations after a two-day closure caused by a Ukrainian attack. However, ongoing geopolitical tensions, such as US sanctions set for November 21 on Rosneft and Lukoil, may offer price support as China, India, and Turkey seek alternative suppliers.
Geopolitical risks, including disruptions from attacks in Sudan and Iran’s recent actions in Gulf waters, continue to affect prices. The value of the US Dollar influences oil price, as oil is predominantly traded in USD, with inventory data from the API and EIA also impacting supply and demand perceptions.
We see WTI crude trading near $59.50 as bearish sentiment takes hold, driven by forecasts of a major supply glut lasting into 2026. Just last week, the Energy Information Administration (EIA) reported an unexpected U.S. crude inventory build of 3.5 million barrels, reinforcing these oversupply concerns. This fundamental picture suggests that any price rallies might be short-lived unless something significant changes.
Impact Of US Sanctions
However, the most critical event in the immediate future is the new round of US sanctions on Rosneft and Lukoil, which are set to begin this Friday, November 21. These sanctions are significant, targeting companies responsible for a large portion of Russia’s seaborne crude exports, potentially disrupting over 1.5 million barrels per day. We are already seeing major buyers in Asia back away, creating a near-term supply shock.
When we look back at the market’s reaction to the initial sanctions following the 2022 invasion of Ukraine, there was a period of extreme price volatility and uncertainty. While the market eventually found new routes for Russian oil, the initial disruption caused significant price spikes. A similar pattern of short-term chaos could play out again, even if the long-term supply picture remains weak.
Given this clash between bearish fundamentals and a bullish short-term catalyst, traders should prepare for a spike in volatility. The CBOE Crude Oil Volatility Index (OVX) has already climbed over 20% this month to 42, showing the market is bracing for sharp price swings. Options strategies like straddles or strangles could be useful for profiting from a large price move in either direction without betting on the outcome.
Beyond this Friday, we will be closely watching weekly inventory reports from the API and EIA for any signs that the sanctions are tightening the U.S. market. Any unexpected draws in crude stocks could signal the supply shock is outweighing the broader surplus trend. These reports will be critical guides for adjusting positions through December.
