Why Is Oil Stuck? Supply Overload Anchors Prices

The oil market remains mired in a supply glut that continues to suppress prices. As of Monday, September 29, 2025, West Texas Intermediate (WTI) futures (CL1!) are trading at $63.36 per barrel, reflecting a sharp 3.59% daily decline and a 0.50% drop over the past five days. Iraq’s resumption of Kurdish oil exports to Turkey, announced this week after a two-and-a-half-year pause, has injected additional supply into an already saturated market.

OPEC+ struggles to enforce production cuts, with Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, publicly urging member compliance to no avail. Concurrently, global demand falters, with China’s industrial output growth slowing to 4.5% year-on-year in August 2025, signaling weaker consumption. This persistent supply-demand imbalance keeps WTI prices rangebound, unable to sustain recent peaks near $67.80.

Geopolitical Shifts Stir Volatility

Geopolitical pressures add layers of complexity to the oil market. The Trump Administration’s renewed push in September 2025 to curb Europe’s reliance on Russian oil, backed by U.S. Treasury Secretary Janet Yellen’s sanctions framework, has disrupted global trade flows. European nations are scrambling for alternative crude sources, briefly pushing WTI prices up by 7% last week. However, the rally collapsed as markets absorbed the reality of abundant supply, with prices dropping 3.65% in a single day.

Ongoing Middle East tensions, including rerouted exports due to regional conflicts, have failed to tighten supply significantly, as strategic reserves and new export routes offset disruptions. These dynamics create short-lived volatility but no lasting price momentum.

Corporate Strategies Signal Caution

Major oil companies are adapting to the challenging market environment. TotalEnergies announced in September 2025 a divestment of non-core global assets, focusing operations in Europe, the U.S., and Brazil to bolster efficiency. This strategic shift reflects broader industry trends, where firms prioritize cost-cutting over expansion amid low price expectations. Such moves highlight the pressure of sustained oversupply and weak demand, forcing companies to streamline to protect margins. While these adjustments may stabilize corporate finances, they do little to address the market’s fundamental oversupply issue.

Looking Ahead with Prudence

The oil market’s path forward depends on resolving the supply-demand mismatch and navigating geopolitical uncertainties. OPEC+’s upcoming October 2025 meetings will be pivotal, as coordinated production cuts could provide price support.

Meanwhile, monetary policy decisions, including those from Federal Reserve Chair Jerome Powell, may influence global economic growth and oil demand. Investors and traders should remain cautious, closely monitoring supply developments and policy shifts. The current price stagnation reflects deep-rooted structural challenges, and only a significant catalyst—such as robust demand recovery or disciplined supply cuts—will shift the market’s trajectory. Staying informed and measured is essential in this uncertain landscape.