On Thursday, the price of crude fell even more, reaching a five-week low of $US82.24 ($129) per barrel.
Even for the famously boom-to-bust oil business, this is a significant U-turn.
In the midst of Saudi Arabia and Russia’s dramatic supply cuts, US crude recently temporarily reached $US95 ($149) per barrel, and Wall Street banks were projecting $US100 ($156) or higher.
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Now that petrol costs in the US are beginning to decline, many anticipate much bigger declines.
In the upcoming weeks, American petrol prices will drop to about 92 US cents ($1.44), predicts Andy Lipow, owner of the consulting firm Lipow Oil Associates.
Additionally, it would be a comfort to White House and US Federal Reserve officials who had been anxiously observing the recent increase in oil prices and worried about the potential harm it could cause to consumer confidence and inflation.
In fact, last month’s spike in US inflation was virtually entirely due to the recent increase in petrol prices.
So why did oil prices spike and then crash?
Some contend that hedge funds and oil bulls have gotten overly bullish.
They piled in to place wagers that prices would rise steadily despite the fact that the fundamentals didn’t support it, encouraged by Saudi Arabia’s supply cuts.
“A lot of speculative pressure is being let out of the tyres,” said Matt Smith, lead oil analyst for the Americas at Kpler.
Smith explained that because the price was “stretched taut like a rubber band,” a few bearish triggers caused it to snap back sharply and quickly.
The most recent catalyst was a US government data that was made public on Wednesday and showed that petrol stockpiles unexpectedly increased last week.
This led to worries about a declining demand for petrol.
Of course, it’s important to keep in mind that, as the previous week shows, the situation on the oil market may alter in a heartbeat.
There is always a chance that further aggressive supply-cutting measures by OPEC+ or disruptions brought on by Russia’s conflict in Ukraine will push oil and petrol prices back up.
As demand from drivers picks up and refineries struggle to keep up, Tom Kloza, global head of energy analysis at the Oil Price Information Service, expects prices at the pump to bounce early next year.