U.S. crude oil drops below $55 a barrel, hits lowest level since early 2021

U.S. crude oil on Tuesday fell below $55 per barrel, hitting the lowest level since early 2021 as traders factor in a looming surplus and the possiblity of a peace agreement in Ukraine.

West Texas Intermediate hit a low of $54.98 per barrel, the lowest level since Feb. 3, 2021. The U.S. benchmark was last trading 2.36% lower at $55.48, while Brent was at $59.13, down 2.36%.

Falling oil prices could also signal a slowing economy. U.S. job growth totalled 64,000 in November but declined by 105,000 in October. The unemployment rate hit a four-year high of 4.6%.

U.S. crude has lost about 23% this year in its worst performance since 2018, while Brent is down about 21% for its worst year since 2020.

U.S. gasoline prices, meanwhile, have fallen below $3 per gallon to the lowest level in four years in a boost to consumers ahead of the holidays, according to the drivers’ association AAA.

The oil market is under pressure this year as OPEC+ members have rapidly ramped up production after years of output cuts. Investors are also pricing in the possibility of lower geopolitical risk as President Donald Trump pressures Ukraine to accept a peace agreement with Russia.

The threat of supply disruptions has loomed over the oil market since Russia launched its full-scale invasion of Ukraine in 2022. Kyiv has launched repeated drone strikes on Russian oil infrastructure this year. The U.S. and its European allies, meanwhile, have targeted Russia’s crude industry with sanctions.

Ukraine’s attacks on oil infrastructure and U.S. sanctions on Russian oil companies would likely be lifted relatively quickly in the event of an agreement, said Jorge Leon, Rystad Energy’s head of geopolitical analysis, in a note to clients.