Oil prices drop to five-year low as supply overwhelms demand

A dramatic collapse in oil prices, which have plummeted to a nearly five-year low, is being driven by a powerful combination of record breaking U.S. production and a fading sense of geopolitical danger that has left global markets awash in crude.

This steep decline in oil prices is turning into an immediate relief at the gas pumps for American drivers as there’s a further drop in national prices for gasoline expected in the coming year.

U.S. Energy Information Administration reveals data that highlights the rise in domestic crude inventories for three consecutive weeks, a surge underpinned by a record setting U.S oil industry that pumped over 13.6 million barrels a day in July.

While this is good news for Americans, this growing glut is compounded by fears of a global economic slowdown, which are threatening the outlook for fuel demand in future.

Simultaneously, the geopolitical “fear premium” that previously propped up prices in past years has all but evaporated.

Recent diplomatic moves notably the Trump-Putin summit have lessened market tensions. 

While new UK sanctions on Russian oil companies remained unsuccessful to elicit any reaction from traders.

A striking sign of this shift is the disclosure of 111 Iranian tankers from the shadows underlining Tehran’s potential readiness to add even more supply to an already saturated market.

In the US, the average price for regular gasoline has already risen to $3.057 a gallon, with averages in states like Texas, Ohio, and Michigan falling below the $3 mark.

The Energy Information Administration additionally predicts a national average of $2.90 a gallon for next year.