The global crude oil commodity market witnessed a sharp drop in prices as it hit the lowest level not seen since early 2021. The decline was driven by expectations of a worsening supply glut and positive developments in peace talks in the Russia-Ukraine conflict.
During Wednesday's trading in the Asian session, Brent oil fell more than 2% to trade below $59 per barrel and West Texas Intermediate (WTI) fell more than 3%, reaching below $55 per barrel.
Cumulatively, both energy products are expected to close the year with an annual loss of more than 20% due to a supply glut in the global market.
Analysts described this situation as an 'extraordinary supply glut' caused by several strategic factors, especially the shift in OPEC+ strategy that aggressively reduced production cuts. Between April and December, production increased by 2.9 million barrels per day.
The move is seen as Saudi Arabia’s attempt to wrest back market share and price control from Western producers.
In addition, the US Energy Information Administration (EIA) expects domestic inventories to continue to rise until 2026.
The prolonged focus on the tanker crisis, with crude oil storage at sea now at over 1 billion barrels, reflects the difficulty sellers face in finding buyers in the physical market.
While OPEC decided to maintain a stable production rate for the first quarter, the International Energy Agency (IEA) warned that market imbalances will continue to loosen.
By 2026, global oil surpluses are expected to reach 3.8 million barrels per day. Market sentiment was also affected by geopolitical de-escalation in Eastern Europe, which has reduced the risk premium on the commodity.
