Oil crashes to lowest level since 2021: What's the reason?
What's the story
Crude oil prices have witnessed a major slump, falling below $55 per barrel for the first time since early 2021. The fall was more than 3% for US benchmark West Texas Intermediate (WTI) and over 2% for global pricing benchmark Brent crude. Analysts attribute this decline to oversupply from oil-producing countries and progress in Russia-Ukraine talks, raising hopes of an end to the conflict and potential increase in Russian oil supply.
Production impact
US oil production surge contributes to price drop
The United States has ramped up oil production and plans to continue this trend into the new year. This increase in supply is another factor contributing to the decline in crude oil prices. Both Brent and WTI crude are expected to end the year 20% lower than last year due to these developments.
Future predictions
Analysts warn of potential further price drops
Analysts have warned that if the OPEC+ cartel doesn't cut supplies and other producers don't slow down, crude prices could drop into the $40s or even $30s per barrel. JPMorgan strategists noted while demand remains strong, supply is "simply too abundant." Macquarie oil analysts also described the situation as being "cartoonishly" oversupplied.