Crude Drops for Third Week as Supply Outpaces Global Demand
Crude prices are sliding again, trapped in a downward spiral that few expected to extend this long. What began as a mild correction has now stretched into a third consecutive week of losses, fueled by rising inventories and growing skepticism about demand.
At around $57 a barrel, West Texas Intermediate has surrendered nearly 3% this week – its longest losing streak since early spring. Behind the decline is an unmistakable message from the data: the world is producing more oil than it can comfortably absorb.
Storage operators in Cushing, Oklahoma, report a surge in bids for tank space as traders rush to secure capacity. The move reflects expectations of a looming glut, a view reinforced by the International Energy Agency’s latest report, which increased its 2025 surplus forecast by nearly one-fifth. The price of U.S. benchmark crude grades has also softened as supply concerns mount.
Politics Offers Little Relief
Market sentiment briefly steadied after President Donald Trump told Fox Business that his proposed 100% tariffs on Chinese imports were “not sustainable,” hinting at possible easing in the trade standoff. The remarks cooled fears that an all-out economic conflict between the world’s two largest oil consumers could choke global demand.
Yet optimism was short-lived. Traders remain wary of mixed messages from Washington. Trump also announced plans for a second meeting with Russian President Vladimir Putin within weeks, signaling renewed diplomatic efforts over the war in Ukraine – but potentially opening the door for more Russian barrels to hit global markets.
“The market is weighing every diplomatic move against overwhelming supply data,” said Joe DeLaura, energy strategist at Rabobank. “With the forward curve slipping into contango, traders are bracing for a softer first half of next year unless demand shocks us to the upside.”
A Market at a Crossroads
Western governments continue tightening sanctions to curb Russian oil revenue, though the impact appears uneven. In India, refiners indicated they would scale back Russian crude imports gradually rather than impose an immediate halt, a stance that could limit how effective Western pressure becomes.
All of this leaves oil in an uneasy limbo – too weak to rally but too strategically important to crash outright. The mix of excess supply, uncertain diplomacy, and fading demand growth has investors shifting from bullish bets to defensive hedging.
The result is a market running on caution. As inventories rise and geopolitical threats ease, crude may find itself drifting lower before any meaningful rebound can take shape.
Source: Bloomberg
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