Over the past few weeks, the price of West Texas Intermediate (WTI) crude oil has experienced a significant decline, dropping from a high of $80.759 per barrel on January 15, 2025, to an intraday low of $68.43 per barrel today. This substantial decrease reflects a combination of factors influencing the global oil market, including supply dynamics, demand fluctuations, and geopolitical developments.
One of the primary factors contributing to the decline in WTI prices is the anticipated increase in global oil supply. The International Energy Agency (IEA) forecasts that global oil supply will rise by 1.6 million barrels per day (b/d) in 2025, primarily driven by non-OPEC+ producers. This increase in supply is expected to exert downward pressure on oil prices as it outpaces demand growth. Additionally, the U.S. Energy Information Administration (EIA) projects that global oil production will continue to grow in 2026, further contributing to potential oversupply.
Despite an uptick in global oil demand growth, with the IEA revising its 2025 forecast upward to 1.1 million b/d, the overall demand remains relatively weak compared to previous years. The OECD regions are expected to see a structural decline in oil demand, while growth in countries like China and India will not be enough to offset this decline entirely. Furthermore, economic concerns in major economies such as the U.S. and Germany have led to fears of slower energy demand, contributing to the recent price drop.
Geopolitical factors have also played a significant role in the recent volatility of oil prices. The easing of OPEC+ production cuts, scheduled to begin in April, is expected to increase global supply further. Additionally, comments from influential figures, such as President Donald Trump urging OPEC+ to increase output and reduce prices, have negatively impacted market sentiment. These developments have contributed to a weakening of the term structure in oil markets, leading to a decrease in prices.
Market sentiment and speculative positioning have also influenced oil prices. Elevated speculative positions have been a near-term headwind for prices, as overbought levels are rationalized. The recent decline in prices may reflect a correction in these speculative positions, aligning with more fundamental supply and demand dynamics.
