Oil Prices Poised to Keep Falling With World Awash in Supply

Old and new oil producers alike are ramping up output as sanctioned barrels from Russia search for buyers, putting a record 1.3 billion barrels of crude on the world’s oceans. Benchmark oil prices are heading for their biggest annual loss since the pandemic, while US gasoline at the pump is less than $3 a gallon for the first time since 2021. The drop is good news for consumers and the politicians who’ve made a point of addressing their cost-of-living concerns, including US President Donald Trump. But it’s also an economic threat to some of the largest producers, like Russia and Saudi Arabia. Oil is as cheap as it was about a decade ago, without adjusting for inflation. At the same time, virtually all of the world’s biggest traders see the oil market in a state of oversupply early next year — the only question is by how much. Bloomberg News Managing Editor for Energy and Commodities Americas Simon Casey joins Bloomberg Businessweek Daily to discuss. He speaks with Carol Massar and Tim Stenovec.

Russia’s flagship Urals crude oil slumped to about $34 a barrel in a signal that US sanctions on Moscow are having an impact.

The grade in the Baltic Sea slumped to $34.82 a barrel on Friday, while in the Black Sea it fell to $33.17, according to prices provided by Argus Media. Dated Brent, a yardstick for international prices, stood at about $61, after falling far less than Russian supplies this year.

President Donald Trump’s administration announced wide-ranging sanctions on Russia’s top two oil producers in October. While the step didn’t halt Russian flows, it did make them more challenging. India in particular looks set to receive fewer barrels from Moscow next month.

While Russia maintains that discounts will start narrowing within months, a long-lasting price slump would bite into the Kremlin’s access to petrodollars to fund its war in Ukraine, given that oil and gas accounts for about a quarter of the budget.

The discounts for Urals work out at an average of about $27 a barrel at point of export, according to Argus. By the time the oil gets to India, that discount narrows to about $7.50. It’s not clear how much of the delivery spread ends up in Russian hands.

The cheaper the oil becomes, the greater the financial incentive there is for refineries to overlook sanctions to buy it — a dynamic that in the past has seen Russian prices normalize after an initial decline.

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