Dr. Ken Rietz
In the US, it is clear something is happening. Gasoline prices keep going down, a phenomenon that we are not always accustomed to seeing. The reason for the drop is easily traced back to crude oil prices going down across the global markets. Lately, the decline has been accelerating. In the three weeks between September 26 and October 17, the price of WTI November 2025 front-month futures dropped by −12.45%. Of course, it is all a question of supply and demand, but there are many factors pushing the price of crude oil, and we will consider most of them in this commentary. But first, let’s look at the graph of WTI crude futures over the past several years. The price of Brent Crude is similar.
Figure 1: Front-month futures on NYMEX WTI crude oil
The prices on WTI futures are clearly dropping during most of 2025. You can even see the accelerated decline in the past few weeks. You would have to go back to 2021, during the recovery from the COVID crash, to find prices this low.
The Wall Street Journal ascribes this drop to two basic causes: a glut of crude oil in the global markets and the fear of a global economic slowdown. This exemplifies the two fundamental forces in all prices: supply and demand. Let’s examine each in more detail in the case of crude oil.
First, we take a look at supply. According to the IEA, the current glut began in early September, when oil production from both OPEC and non-OPEC countries was increasing in order to gain market share, and supply surged as a result. The amount of crude oil being transported or stored on water hit 102 million barrels of oil then, the largest amount in that condition since the COVID pandemic. As this oil is unloaded onshore, stocks will rise, and the glut will only get worse. Russia (the third largest producer) and Iran (the fifth largest producer) are facing increasing sanctions, making it hard to export the oil to generate revenue that their economies desperately need. However, that is not enough to reduce the supply of crude oil globally. Russian refineries are subjected to Ukrainian drone attacks that severely damage their output. The situation is complex. However, reduced refining capability does increase the supply of (unrefined) crude oil. In summary, the overwhelming number of factors show the supply of crude oil is increasing.
The other aspect that needs to be considered is the demand for crude oil. The general global economy is sluggish at best right now. A brief glance at the International Monetary Fund’s World Economic Outlook shows that global growth prospects remain dim and that the outlook is fragile. Specifically, the IEA notes that oil demand growth for 2025 keeps being lowered, currently down by 350 kb/d to a demand of 700 kb/d expected to continue through next year. In summary, the major factors all show a slowdown in demand for crude oil.
Given all this gloom, how should crude oil be traded? The factors that show the supply is growing don’t show any signs of slowing down. In fact, OPEC has already announced that they are going to increase its crude oil production in November. The demand for crude oil doesn’t look to be increasing anytime soon. The clear path in trading is to expect the price of crude oil futures to continue declining. As always, unanticipated geopolitical events can change this in a moment.