Oil prices fall to 2021 lows, can they stop falling next week?

Oil prices are facing multiple pressures. On December 16, WTI crude oil prices fell below the $55 mark, closing at $54.98 per barrel, hitting the lowest level in nearly four years. Brent crude also declined, recording $58.72 per barrel, marking an eight-month low.

Ample Supply vs. Weak Demand, Oil Prices in Trouble

Since 2025, WTI crude oil has declined by over 20%, a drop of 23%; during the same period, Brent crude fell by 21%. The downward trend is driven by clear logic—OPEC+ continues to restore production capacity, and non-OPEC oil-producing countries are also increasing supply, leading to a significant easing of global oil supply. Meanwhile, oil demand from major economies like the US and China shows signs of weakness, with supply far exceeding demand, resulting in falling oil prices.

Russia-Ukraine Ceasefire Expectations Rise, Market Worries of Further Supply Flooding

Latest news reports indicate optimistic comments from US President Trump, suggesting that Russia and Ukraine are close to reaching a peace agreement. This has triggered a chain reaction in the market—if a ceasefire materializes, US sanctions on Russian oil could be quickly relaxed, and strikes on Russian energy infrastructure in Ukraine would cease. Analysts worry that a large volume of Russian oil will flood the market, further exacerbating the global oversupply situation.

However, there are also differing opinions. Analysts from Deutsche Bank point out that although an end to the war seems likely, the scope for a significant increase in Russian oil supply is actually limited—Russia is currently constrained by OPEC+ production cut agreements, with output near its capacity limit. In other words, the current price decline may be an overreaction, and the market could be overly pessimistic.

Next Week’s Outlook: Extreme Technical Signals, Cautious Shorting

Research institutions have issued a clear warning: do not establish new short positions when WTI crude oil prices are below $55. The main reason is that, from a technical perspective, oil prices have entered an obvious oversold zone. Although the US is expected to face oversupply next month, this does not mean prices will fall indefinitely—extreme price levels may contain opportunities for a rebound.

Investors should be cautious that, at such low price levels, the risk-to-reward ratio of increasing short positions is no longer favorable.