Oil prices have increased as US Congress progresses towards passing a funding bill to end the government shutdown, which supports demand recovery in the oil market. West Texas Intermediate (WTI) US Oil is trading around $60.75 a barrel, showing a 1.20% rise on Tuesday, driven by optimism that reopening the US government will revive economic activity.
The US Senate approved a temporary funding bill by a 60-40 vote, raising expectations for an end to the budget impasse. This is expected to lead to a short-term rebound in energy consumption as federal operations resume, while oil supply remains high with US inventories increasing for the fourth consecutive week and a doubling of Asian floating storage since October.
Global Oil Benchmarks
Global crude benchmarks have fallen by about 15% since mid-September, due to increased non-OPEC output and slower Chinese refining demand. OPEC+ plans to increase production by 137,000 barrels daily in December, pausing hikes in early 2026 to rebalance the market.
WTI’s rise is also influenced by a weaker US Dollar amid job loss data, supporting further monetary easing expectations. Reports from OPEC, API, and the US Energy Information Administration will soon offer updated insights into the oil market balance.
The oil market is currently caught between conflicting signals, creating a tense environment for traders. We see the price of WTI crude around $60.75, lifted by optimism that the end of the US government shutdown will spur economic activity and fuel demand. This positive sentiment, however, is being capped by the persistent reality of global oversupply.
The case for higher prices hinges on renewed demand and a weaker US dollar, which makes oil more affordable for international buyers. Last week’s report from the Energy Information Administration (EIA) showed a surprise draw of 1.5 million barrels, snapping a four-week streak of inventory builds and giving bulls some fresh ammunition. This suggests that the demand boost from the government reopening might be showing up in the data sooner than expected.
Potential Market Strategies
Still, we cannot ignore the supply overhang that has pressured prices down 15% since mid-September. While slower Chinese demand has been a concern, China’s official manufacturing PMI for October was recently reported at 50.2, indicating a slight and unexpected return to expansion. This could mean that the drag from Asia is beginning to lessen, potentially shifting the supply-demand balance.
Given this uncertainty, derivative traders should anticipate increased volatility in the coming weeks. Rather than taking simple directional bets, strategies like buying straddles could be effective to profit from a significant price move, regardless of direction, ahead of the next OPEC+ meeting in December. For those leaning bullish but wanting to limit risk, bull call spreads offer a defined way to play a potential grind higher.
Looking back, we saw a similar situation after the 2018-2019 government shutdown, where WTI prices gradually recovered in the following months as economic normalcy returned. While every market is different, this historical precedent suggests the resolution of US fiscal uncertainty could provide a floor for prices. Therefore, the immediate focus should be on the upcoming weekly API and EIA inventory reports to see if last week’s demand surge was a fluke or the start of a new trend.
