By Ryan Dezember

A growing glut of oil and fear of a global economic slowdown have pushed U.S. crude prices to their lowest point since fuel markets were rebounding from the Covid crash.

Most actively traded U.S. oil futures ended Thursday at $56.99 a barrel, down 2.2% on the day and 19% from a year ago. That marked the lowest price since February 2021. Brent crude futures, the international gauge, shed 1.4% Thursday to end at $61.06 a barrel, the lowest since May, when President Trump's tariff barrage sank oil prices.

The decline is good news for American consumers because cheaper crude portends lower prices for gasoline, diesel, jet fuel and heating oil. But it is an alarming situation for a U.S. oil industry already beset by narrowing profit margins and shedding jobs by the thousands.

Five years ago, the plunge in demand for transportation fuels during the pandemic lockdowns drove U.S. oil prices negative for the first time ever. That effectively meant sellers had to pay buyers to take barrels off their hands. Producers resorted to filling ocean tankers with the sudden surfeit, and it took about a year for prices to climb back.

Once again, a flood of fuel is being stashed offshore. The volume of oil at sea swelled by about 3.4 million barrels a day in September, the greatest increase since the pandemic, according to the International Energy Agency.

The glut has reduced prices for U.S. drivers, who were already expected to spend the smallest portion of their income on gasoline in years. The average retail prices for regular unleaded gasoline was $3.057 a gallon on Thursday, about 15 cents less than a year earlier, according to AAA.

The IEA is among the energy-market forecasters anticipating that the glut will grow in the coming months given that producers from the Middle East to Midland, Texas, are pumping oil as if prices were climbing toward highs rather than tumbling to multiyear lows.

U.S. oil producers notched a fresh output record of more than 13.6 million barrels a day in July, according to the most recent data available from the Energy Information Administration. The federal agency's weekly petroleum report, which has continued to be published despite the government shutdown, suggests that production has remained around that level.

Meanwhile, the Organization of the Petroleum Exporting Countries and its market allies have been rolling back production cuts that were implemented in 2023, when energy prices were falling from highs hit after Russia invaded Ukraine the year before. The cartel's aim is to retake market share from free-market drillers in the U.S., Brazil, Guyana and elsewhere -- with which OPEC has waged repeated price wars over the past decade.

Earlier this month, Saudi-led OPEC said it would boost production by 137,000 barrels a day in November, as it has this month. It added back a bigger chunk of its curtailment in September, a year ahead of schedule. OPEC said earlier this week that it expects demand to rise next year and balance the market.

U.S. producers haven't pulled back much. Although there are 63 fewer rigs drilling for crude in the U.S. than a year ago, according to oil-field services firm Baker Hughes, efficiency gains and ever-larger wells have enabled domestic producers to extract more with less.

Energy data-firm East Daley Analytics expects U.S. oil production to end this year around the record 13.6 million barrels a day.

One reason why the firm doesn't expect U.S. producers to slow down is that they often have obligations to supply other fuels, including natural gas and propane, that flow from the same wells as oil.

"A shock in one doesn't mean there's a shock in the others," said Chris Noonan, senior analyst at East Daley.

Producers are unlikely to unwind drilling programs on which they have already spent millions of dollars and positioned building-sized rigs, he said. If producers were to pause, they risk losing market share and missing a rebound in prices, given the months it can take to start earning money from a drilling project.

Analysts say the oversupply of oil has been partly masked this year by China's stockpiling of crude. The country's oil imports in September were 3.9% higher than a year earlier, Commerzbank said, citing Chinese customs data.

Escalations in the trade war between China and the U.S. this month have added fuel to forecasts for slowing economic growth in the world's two largest economies and therefore weaker oil demand.

Write to Ryan Dezember at ryan.dezember@wsj.com

(END) Dow Jones Newswires

October 16, 2025 15:17 ET (19:17 GMT)

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