**Oversupply Continues to Pressure Energy Prices**
Since entering 2025, the crude oil market has been trapped in a continuous downtrend. WTI crude has accumulated a 23% decline since the start of the year, while Brent crude has fallen 21%. On December 16, WTI crude slipped to $54.98/barrel, touching its lowest point since February 2021, while Brent crude also reached $58.72/barrel, marking an 8-month low. Behind this wave of declines lies a structural imbalance in the global energy market—OPEC+ is gradually ramping up production capacity, non-OPEC countries continue to increase output, while simultaneously facing weak demand from major economies like China and the US, intensifying a situation of ample supply and insufficient demand.
**Ceasefire Negotiations Trigger New Supply Disruption Expectations**
On the news front, President Trump recently stated that Russia and Ukraine are close to reaching a peace agreement. This development has sparked new market speculation—once a ceasefire is established, US economic sanctions on Russian oil could be swiftly lifted, Ukrainian attacks on Russian energy infrastructure would cease, and substantial volumes of Russian crude could return to international markets. According to Rystad Energy analyst Jorge Leon's assessment, this move would further exacerbate global oversupply conditions.
However, Commerzbank analyst Carsten Fritsch presents a contrasting view. He argues that while the Russia-Ukraine conflict may end, Russia's capacity to significantly increase oil output is limited, as the country is already constrained by OPEC+ production agreements, with current output already near its production capacity ceiling. Within this framework, the current oil price decline "may have exceeded what fundamentals can explain."
**Technical Oversold Signals Send Risk Warning**
The latest assessment from Ritterbusch & Associates indicates that while the US may still face oversupply conditions next month, the institution warns investors to exercise caution in chasing shorts. The key warning is: **when WTI crude breaks below $55/barrel, technical indicators have clearly shown oversold conditions, making it inadvisable to establish new short positions**. This signals to market participants that despite ongoing downward pressure from fundamentals, extreme price levels already embed rebound risks.
Russia-Ukraine Peace Talks Elevate Oil Price Floor Risk; Why Analysts Warn Against Chasing Shorts?
**Oversupply Continues to Pressure Energy Prices**
Since entering 2025, the crude oil market has been trapped in a continuous downtrend. WTI crude has accumulated a 23% decline since the start of the year, while Brent crude has fallen 21%. On December 16, WTI crude slipped to $54.98/barrel, touching its lowest point since February 2021, while Brent crude also reached $58.72/barrel, marking an 8-month low. Behind this wave of declines lies a structural imbalance in the global energy market—OPEC+ is gradually ramping up production capacity, non-OPEC countries continue to increase output, while simultaneously facing weak demand from major economies like China and the US, intensifying a situation of ample supply and insufficient demand.
**Ceasefire Negotiations Trigger New Supply Disruption Expectations**
On the news front, President Trump recently stated that Russia and Ukraine are close to reaching a peace agreement. This development has sparked new market speculation—once a ceasefire is established, US economic sanctions on Russian oil could be swiftly lifted, Ukrainian attacks on Russian energy infrastructure would cease, and substantial volumes of Russian crude could return to international markets. According to Rystad Energy analyst Jorge Leon's assessment, this move would further exacerbate global oversupply conditions.
However, Commerzbank analyst Carsten Fritsch presents a contrasting view. He argues that while the Russia-Ukraine conflict may end, Russia's capacity to significantly increase oil output is limited, as the country is already constrained by OPEC+ production agreements, with current output already near its production capacity ceiling. Within this framework, the current oil price decline "may have exceeded what fundamentals can explain."
**Technical Oversold Signals Send Risk Warning**
The latest assessment from Ritterbusch & Associates indicates that while the US may still face oversupply conditions next month, the institution warns investors to exercise caution in chasing shorts. The key warning is: **when WTI crude breaks below $55/barrel, technical indicators have clearly shown oversold conditions, making it inadvisable to establish new short positions**. This signals to market participants that despite ongoing downward pressure from fundamentals, extreme price levels already embed rebound risks.
Zhou Siyue