Crude benchmarks tumble mid-week
Oil prices fell sharply on Wednesday, with West Texas Intermediate crude dropping below the psychologically important $60 per barrel level for the first time this week.
WTI crude settled at $59.36 per barrel, down 2.66% on the day, while Brent crude declined 2.71% to $63.81 per barrel. The selloff ended a five-day rally that had lifted prices to their highest levels since October.
Easing Iran tensions trigger reversal
The decline followed comments from President Donald Trump indicating that concerns about escalating tensions with Iran had eased. Oil had rallied over the past week amid fears that unrest in Iran, OPEC's fourth-largest producer pumping roughly 3.3 million barrels per day, could disrupt supply or key shipping routes.
With those fears subsiding, traders moved to unwind the geopolitical risk premium that had been built into prices. Brent crude had briefly touched $66.82 per barrel during last week's rally before retreating more than 4%.
Oversupply concerns persist
Beyond the immediate catalyst, the broader market outlook remains bearish. The International Energy Agency expects global oil supply to exceed demand by 3.85 million barrels per day in 2026, equal to nearly 4% of global consumption.
The U.S. Energy Information Administration projects Brent crude will average just $56 per barrel in 2026, down 19% from 2025 levels. WTI is forecast to average $52 per barrel this year and $50 per barrel in 2027.
Major forecasters including Goldman Sachs and J.P. Morgan have also lowered their price outlooks, with most projecting WTI to trade in the low-to-mid $50s throughout 2026.
Inventory data adds pressure
Adding to the bearish sentiment, recent EIA data showed U.S. crude and gasoline inventories rose last week, though distillate stockpiles declined. Rising inventories tend to weigh on prices as they signal weaker demand or excess supply.
What to watch
Traders will be monitoring upcoming inventory reports and any developments in global demand, particularly from China. The persistence of WTI below $60 per barrel could also begin to impact U.S. shale production decisions, as many producers face breakeven costs in the $61 to $66 per barrel range according to Dallas Federal Reserve survey data.
For now, the combination of adequate supply and uncertain demand growth suggests prices may remain under pressure in the near term.