Oil Sinks Below $60 as Market Loses Faith in Supply Outlook
The mood in global energy markets turned decisively negative this week as crude prices slid below the $60 mark, erasing earlier gains.
- Crude prices tumble after Saudi Arabia’s latest pricing move unsettles traders.
- Investors see growing signs that a supply surplus could emerge in 2026.
- Equity weakness and shifting refinery patterns compound bearish sentiment.
Investors, already rattled by global equity losses, were quick to interpret Saudi Arabia’s latest pricing decision as a warning that producers may be preparing for weaker demand ahead.
For the December delivery period, Riyadh trimmed the selling price of its flagship grade to Asian buyers to its lowest in nearly a year. The cut wasn’t unexpected — but the symbolism was unmistakable. It hinted that even the region’s most influential exporter is no longer convinced that consumption can keep pace with swelling supply.
A Market Losing Its Bullish Core
What once looked like a tight oil market is now showing cracks. Futures spreads that measure near-term scarcity have thinned dramatically, signaling that buyers are far less worried about shortages. In both WTI and Brent, the backwardation structure — a hallmark of bullish markets — has almost disappeared, resembling levels last seen during the winter lull.
That shift comes despite the United States imposing sanctions on two of Russia’s largest oil producers only weeks ago. The punitive measures were expected to constrict flows, but instead, alternative suppliers quickly filled the gap, leaving inventories comfortably stocked.
Refined Fuels Defy the Trend
If crude is losing steam, refined fuels are still showing muscle. Diesel and gasoil prices have climbed to their highest since midsummer as traders calculate the combined effects of Ukraine’s strikes on Russian energy assets and Washington’s tougher stance on Russian exports.
Reduced global refining capacity has magnified the impact. “The fuel complex remains tight, and that’s what’s keeping crude from falling even faster,” explained Rebecca Babin of CIBC Private Wealth Group. “But the broader balance is loosening — supplies are adequate, and time spreads are softening fast.”
India’s Refiners Adjust Course
Adding to the market’s turbulence, refiners in India — one of the world’s biggest importers — are quietly reshuffling their supply chains. Sanctions have made the once-lucrative purchases of discounted Russian barrels harder to navigate, prompting companies such as Reliance Industries to offload some Middle Eastern cargoes instead of consuming them at home.
Such unusual sales underline how complex global flows have become. Even as refiners search for new suppliers, OPEC+ production remains robust, and non-member nations are boosting output as well. According to Mercuria Energy Group, the resulting surplus could reach two million barrels a day next year, enough to suppress prices if demand growth falters.
The Broader Backdrop: Politics and Pressure
The geopolitical map offers no relief. Tensions between the United States and Venezuela, another OPEC founding member, continue to simmer. Though Washington has reportedly dismissed the idea of direct strikes, the standoff adds uncertainty to an already fragile market psychology.
After a volatile year marked by overproduction and shifting demand, oil prices are down roughly 19% year-to-date. The story that began as a tight-supply narrative has evolved into one of caution — a market weighed down by surplus fears and investor fatigue.
As traders prepare for the year’s final stretch, one theme dominates conversations: the market is well supplied, but confidence is in short order.
Alex is an experienced financial journalist and cryptocurrency enthusiast. With over 8 years of experience covering the crypto, blockchain, and fintech industries, he is well-versed in the complex and ever-evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His approach allows him to break down complex ideas into accessible and in-depth content. Follow his publications to stay up to date with the most important trends and topics.
