FX.co ★ Crude Oil Drops to Early-2021 Low

On Monday, West Texas Intermediate (WTI) crude oil futures declined to approximately $56.6 per barrel, marking the lowest point since early 2021. This drop was primarily due to ongoing oversupply concerns overshadowing geopolitical risks. The global oil supply remains abundant, bolstered by high inventory levels and increasing output from the United States, Brazil, and Guyana. These factors support the forecast that production growth will likely continue to surpass demand until 2026, ensuring a well-supplied physical market. Conversely, demand signals appear weak, with China displaying reduced industrial activity and an increasing shift toward renewable energy for power generation, heightening fears that demand growth will not sufficiently absorb the surplus supply. Prospects for peace negotiations in Ukraine also contributed to price pressures, as the possibility of a ceasefire would diminish the risk premium associated with potential disruptions to Russian oil supply. Furthermore, U.S. measures against Venezuela and rising tensions involving Iran in the Gulf of Oman offered minimal upward pressure, as these issues were not deemed severe enough to significantly tighten global supply.