Crude Oil Plunge: Brent Drops Below $60 as Oversupply Fears Dominate

Deep News12-17 07:52

Crude oil markets witnessed a dramatic selloff as both Brent and WTI futures tumbled nearly 3%, mirroring earlier declines in China's SC crude. The breakdown below key technical levels signals deepening bearish sentiment amid persistent oversupply concerns.

Market Overview Brent crude breached the $60/bbl threshold for the first time in seven months, settling at $58.92 (-2.71%), while WTI closed at $55.27 (-2.73%). China's INE crude futures fell 2.24% to 422.5 yuan/barrel. The selloff occurred despite an unexpectedly large 9.32 million barrel draw in US API crude inventories, highlighting market indifference to temporary bullish signals.

Fundamental Drivers 1. Supply Glut Intensifies: EIA's December report revealed a 400,000 bpd upward revision to global oversupply estimates for October-November, corroborating inventory buildup across major trading hubs. 2. Geopolitical Premium Evaporates: European diesel cracks have fully erased sanctions-related gains, while Venezuela-related supply disruptions failed to spark meaningful price reactions. 3. Structural Weakness: The market has transitioned from event-driven volatility to sustained downward pressure from fundamental imbalances.

Key Developments 1. Venezuela severed all gas supply agreements with Trinidad and Tobago, accusing the nation of complicity in US "oil piracy" after the December 10 seizure of a Venezuelan tanker. 2. Asia's fuel oil rebound proved short-lived, with Singapore 380-cst HSFO slipping to $4+/ton discounts amid inventory liquidation pressures. 3. Kuwait's 205,000 bpd Al-Zour CDU restarted December 13, adding to regional supply.

Analyst Insight With OPEC+ and non-OPEC production growth converging against softening demand, the supply surplus appears structural rather than cyclical. While technically oversold conditions may prompt temporary rebounds, the absence of material bullish catalysts suggests limited upside potential. Market participants should note that even Brent's closing price ($58.92) now stands at its lowest year-to-date level, confirming the breakdown's technical significance.

Market Watch Traders are monitoring: - Potential extension of Russia's fuel export restrictions into February - Operational impacts from PDVSA's reported cyberattack - Progress on Russia-Ukraine peace negotiations that could further reduce geopolitical risk premiums

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