Oil drops below $100 a barrel for the first time since early May

The price of West Texas Intermediate crude fell 10% on Tuesday, hitting a low of $97.43 before closing at $99.50, down 8% on the day. Brent crude fell more than 10% when it hit a daily low of $101.10 a barrel, before settling at $102.77 at the close.

This is the first time that WTI has fallen below $100 since May 11. It was the last time Brent crude, which usually trades a little higher, fell below $102 a barrel. Brent crude hasn’t been below $100 since April 25.

Wholesale gas futures were also down, down nearly 10% for the day at close, or 36 cents a gallon.

The national average cost of a gallon of gas at the pump is now $4.80, according to the latest AAA reading, down a penny from Monday and 8 cents from last week. gas prices Exceeded the $5 mark It debuted on June 11 and peaked at $5.02 per gallon on June 14.

Concerns grow over the possibility of a recession It is the main driver of the latest selling in oil and gasoline prices Tom Cluza, global head of energy analysis at OPIS, said futures.

Until recently, oil and gasoline investors believed that there was little market force to keep prices in check in the near term. “There is now a conceivable Huge downside risks associated with recession risks.”

There have been growing fears of a recession in recent weeks, which has helped bring down oil prices sharply. Brent crude was at $123.58 a barrel on June 8, while WTI was at $122.11. But since that climax, Consumer Price Index It showed that consumer prices reached their highest level in 40 years, which is one of the main metrics that drove the Federal Reserve to do so raise interest rates by three-quarters of a percentage point as a way to combat these price pressures. This has raised expectations that the central bank’s aggressive moves to cool the economy may lead to this happening It causes job loss and stagnation.
Oil and gas prices soared earlier this year after Russia’s invasion of Ukraine prompted the United States and its European allies to Sanctions on Russian energy exportseffectively strangling one of the world’s largest producers.

But the supply of oil is only part of the equation that traders take into account when bidding on oil futures contracts. The demand is the other part. Nothing kills demand like a recession that reduces economic activity in general. When people are laid off, there are fewer people driving to work, to the store, or to other destinations.

The last time gas hit a record was during the Great Recession, when the national average hit $4.11 a gallon. July 2008. But by the end of that year, it was down 60%, to $1.62 a gallon, as demand plummeted. But cheap gas was little consolation for the nearly 3 million people who lost their jobs during those five months.

So far, drivers have seen relatively little relief at the gas pump from the recent drop in oil and gasoline futures. The national average price of gas is down just 4%, or 22 cents, since June 14, while wholesale gas futures are down 22% since hitting $4.28 a gallon on June 9.

US gasoline retailers have little incentive to cut prices deeper with strong demand for gasoline with summer driving season In full swings.

“There is no compelling reason for retailers to cut their prices further with such strong demand,” Kloza said.

There could be more price drops at the pump in the near term — another 10 cents a gallon drop in the next week or so wouldn’t be a surprise, Kloza said. Station owners who pay less for wholesale gas will monitor how much savings their competitors pass on to customers before they set their own prices. But Kloza said the expression that gas prices are rising like a rocket and falling like a feather is likely to reappear.

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He predicted that there likely won’t be any significant drop until schools reopen and the summer driving season ends this fall. There are also risks that additional developments in Russian oil exports related to the war in Ukraine or hurricanes hitting US oil infrastructure along the Gulf Coast could cause prices to rise rapidly again.

“I will not leave until now the fives used in gas price signs,” he said.

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