The oil market’s two-year bull run is running into one of its biggest tests in months, facing a tidal wave of supply and growing worries about economic weakness sapping demand worldwide.

After topping out at more than $75 and $85 a barrel just a month ago, both U.S. crude and Brent benchmark futures have grappled with near-relentless selling. For a time, prices had some support on hopes that renewed U.S. sanctions on Iran would force barrels off the market.

That changed in the last week. The world’s three largest producers - Russia, Saudi Arabia and the United States - all indicated they were pumping at record or near-record levels, while the United States said it would allow waivers that could allow buyers to keep importing Iranian oil, lessening the threat of a supply crunch.

Those factors, along with a spate of recent weak economic reports out of China and other emerging markets, have shifted the conversation back toward worries about oversupply, and pushed U.S. futures to lows not seen since April, interrupting an upward move that had consistently found support during the rally’s modest pullbacks.

The structure of the U.S. crude futures curve had for several months indicated expectations for tighter supply, but future-dated contracts now suggest investors think markets could be awash in oil over the coming months.

"The magnitude of recent selling is strongly suggesting that global oil demand is weaker than expected as a result of tariff issues, especially between the U.S. and China,” said Jim Ritterbusch, president of Ritterbusch & Associates.

There has been an exodus among speculators as well. In the last two weeks, net bullish bets on oil have declined to the lowest level in over a year. Selling notably accelerated on Thursday after U.S. West Texas Intermediate (WTI) crude futures fell below $65 a barrel, a level that had stood firm in previous selloffs during the summer and fall.

The oil market ran higher in anticipation of this week’s formal re-imposition of sanctions against Iran by the United States, and on concerns that supply from producers like Saudi Arabia would not be able to make up the difference.

Agencies