The oil market is undergoing a stunning reversal as crude futures wipe out this year's gains after hitting their highest levels since 2014 just six weeks ago.
The slump reflects a fundamental change in the outlook for the oil prices. A month ago, traders were concerned that a looming shortage of oil would push crude futures to $100 a barrel. Now, supply is expected to swamp demand at the start of 2019.
As a result, oil prices have plunged more than $20 a barrel since the start of October, when Brent crude rose to nearly $87 a barrel and U.S. crude traded just shy of $77. Both benchmarks are now trading firmly in bear market territory, having fallen more than 20 percent from their 52-week highs.
Along the way, U.S. crude has posted its longest losing streak since it began trading in New York more than three decades ago. The contract has now fallen for 12 consecutive sessions. It settled at $55.69 on Tuesday, its lowest closing price since Nov. 16, 2017.
The roots of the pullback can be traced back to the most recent rally itself. At the peak of the run-up, many energy analysts said oil prices never should have risen so far so fast.
Crude futures rose to four-year highs on Oct. 3 as the market braced for renewed U.S. sanctions on Iran, OPEC's third biggest producer. Through September, the threat of sanctions wiped about 800,000 barrels a day off the market, fueling speculation that some oil importers would struggle to find supplies.