Record-breaking US crude oil production is intensifying market concerns about global supply oversupply. Despite unexpectedly strong demand for certain refined products, traders' bearish sentiment toward crude oil prices has reached extreme levels not seen in years, signaling potential sustained downward pressure on oil prices.

On August 29, according to the monthly report released by the US Energy Information Administration (EIA), US crude oil daily production in June climbed to 13.58 million barrels, not only setting a new historical record but also exceeding preliminary weekly estimates by approximately 150,000 barrels per day.

This record production pushed total US liquid fuel production in June to a historic peak of 21.1 million barrels per day, an increase of about 145,000 barrels from the previous month.

Abundant supply has translated into lower consumer costs. According to GasBuddy analysis, American drivers will face the cheapest gasoline prices in five years for the upcoming Labor Day on September 1, with gasoline prices expected to average $3.15 per gallon.

President Trump stated this week that crude oil futures prices will "soon" fall below $60 per barrel. As of Friday's New York close, US crude oil prices hovered around $64 per barrel.

**Unexpectedly Strong Demand**

While supply-side data presented bearish signals, the demand-side data in the EIA report brought surprises.

The report revised June diesel demand upward to approximately 4 million barrels per day, an upward revision of about 6% and an 8.3% year-over-year increase.

Aviation fuel demand, viewed as a bright spot in the oil market, also performed excellently, with revised data 4.3% higher than preliminary estimates and showing 4.2% year-over-year growth.

According to reports, diesel and aviation fuel markets have been in historically tight conditions during the first half of this year due to surging demand, declining inventories, and shortages of heavy crude oil suitable for producing these fuels.

However, broader indicators paint a pessimistic future picture. Energy strategist Phil Flynn noted that the US four-week moving average for gasoline demand is approximately 9 million barrels per day, down 1.1% year-over-year.

International Energy Agency data also shows global oil consumption growing only modestly by 0.8% this year, or about 830,000 barrels per day.

**Bearish Sentiment Reaches Historical Extremes**

Despite current robust demand performance, market sentiment has become extremely pessimistic.

According to data from the US Commodity Futures Trading Commission (CFTC), speculators' net long positions in WTI crude oil have fallen to their lowest level in nearly 18 years.

In the week ending August 26, speculators' net long positions in WTI crude oil decreased by 5,461 contracts to 24,225 contracts.

Data shows that the sharp intensification of bearish sentiment was primarily driven by surging short positions, with WTI crude oil short positions reaching absolute values not seen in about 20 months.

Market pessimism primarily stems from future expectations. Traders widely anticipate that a supply glut will arrive by year-end and continue into next year.

Goldman Sachs analysis suggests that starting from the fourth quarter of 2025 through the end of 2026, the global market will face a daily crude oil surplus of 1.8 million barrels. If this trend continues, it will result in cumulative global crude oil inventory increases of nearly 800 million barrels by the end of 2026.

Part of the reason is that OPEC+ is reintroducing production that was previously cut to support oil prices back to the market.

Additionally, Organization for Economic Cooperation and Development (OECD) countries will contribute approximately one-third of inventory growth, reaching 270 million barrels. This inventory accumulation coincides with weakening oil demand in OECD countries themselves, which will further depress oil prices.

**Price Outlook and Geopolitical Risks**

Looking ahead, most forecasts point to continued oil price declines.

The EIA expects Brent crude oil prices to average $67 per barrel in 2025, falling to $51 per barrel by 2026.

LPL Financial's Chief Technical Strategist Adam Turnquist noted in a report that WTI crude oil's recent break below $65 could prompt a retest of this spring's intraday low of around $55.

Nevertheless, geopolitical risks remain.

ING's commodity strategists stated in a report:

"The lack of progress on (Ukraine) peace agreements means that the risk of sanctions and secondary tariffs continues to loom over the oil market."

These uncertainties, combined with potential changes in Middle Eastern situations, could still trigger sudden oil price volatility at any time.