What is the story about?
Amid excess supply and high hopes for an end to the war between Russia and Ukraine, crude oil prices on Tuesday fell 3 per cent to below $55 a barrel at one point — the lowest level since early 2021.
Futures on US benchmark West Texas Intermediate (WTI) fell by more than 3 per cent to below $55 and international pricing benchmark Brent crude's futures fell by over 2 per cent to below $59 a barrel, according to Yahoo Finance.
For both of these benchmarks, these were the lowest levels since 2021 when oil prices had fallen to their lowest point in years because of the Covid-19 pandemic.
Analysts have attributed these low prices to excess supply by oil producing countries, including the cartel of Organization of the Petroleum Exporting Countries and its allies (OPEC+), and progress in Russia-Ukraine talks that have led to hopes that the war could soon end and Russian oil's supply could increase.
Under President Donald Trump, the United States has also been increasing oil production and is set to extend the surge in supplies into the new year.
Owing to these factors, both Brent and WTI crude are set to close the year 20 per cent lower year-on-year.
Analysts have said that the oil market is "cartoonishly oversupplied" and warned crude prices could drop into $40s or $30s a barrel.
In a note cited by Yahoo, JPMorgan strategists wrote that while demand remains robust, the supply is "simply too abundant"
If the OPEC+ cartel does not cut supplies and other producers don't slow down as well, the strategists said crude could drop into the $40s or even $30s a barrel — levels that would be catastrophic for the industry and not seen since the oil prices hit rock bottom in 2020 during the pandemic.
Macquarie oil analysts summed up the situation as being "cartoonishly" oversupplied.
"Our near-term balances now appear even more bearish than what we had previously characterized as 'cartoonishly' oversupplied," the note said, as per Yahoo.
Futures on US benchmark West Texas Intermediate (WTI) fell by more than 3 per cent to below $55 and international pricing benchmark Brent crude's futures fell by over 2 per cent to below $59 a barrel, according to Yahoo Finance.
For both of these benchmarks, these were the lowest levels since 2021 when oil prices had fallen to their lowest point in years because of the Covid-19 pandemic.
Analysts have attributed these low prices to excess supply by oil producing countries, including the cartel of Organization of the Petroleum Exporting Countries and its allies (OPEC+), and progress in Russia-Ukraine talks that have led to hopes that the war could soon end and Russian oil's supply could increase.
Under President Donald Trump, the United States has also been increasing oil production and is set to extend the surge in supplies into the new year.
Owing to these factors, both Brent and WTI crude are set to close the year 20 per cent lower year-on-year.
Market 'cartoonishly oversupplied' as crude could drop to $30s, say analysts
Analysts have said that the oil market is "cartoonishly oversupplied" and warned crude prices could drop into $40s or $30s a barrel.
In a note cited by Yahoo, JPMorgan strategists wrote that while demand remains robust, the supply is "simply too abundant"
If the OPEC+ cartel does not cut supplies and other producers don't slow down as well, the strategists said crude could drop into the $40s or even $30s a barrel — levels that would be catastrophic for the industry and not seen since the oil prices hit rock bottom in 2020 during the pandemic.
Macquarie oil analysts summed up the situation as being "cartoonishly" oversupplied.
"Our near-term balances now appear even more bearish than what we had previously characterized as 'cartoonishly' oversupplied," the note said, as per Yahoo.
