Oil extended its drop below $100 a barrel for the first time since late April as fears of a global recession spread amid continued supply disruptions.
Oil prices, which rose to above $120 a barrel a month ago, have been slipping over the last two weeks.
International benchmark Brent crude settled 9.45%, or $10.73, lower at $102.77 per barrel.
Ritterbusch and Associates attributed the move to “tightness in global oil balances increasingly being countered by strong likelihood of recession that has begun to curtail oil demand.” The firm said that the “oil market appears to be homing in on some recent weakening in apparent demand for gasoline and diesel.”
Citigroup Inc. has warned that Brent crude oil could fall to $65 by the end of this year if a demand-crippling recession hits. “In a recession scenario with rising unemployment, household and corporate bankruptcies, commodities would chase a falling cost curve as costs deflate and margins turn negative to drive supply curtailments,” the firm wrote in a note to clients.
Gas prices in the U.S. have been touching record highs with regular gasoline now selling for less than $5 a gallon.
The biggest driver of the cost of gas is the price of crude oil which is hovering around $120 a barrel, up from $70 a year ago. Demand for oil also sharply increased faster than oil production after the pandemic lockdowns and restrictions were lifted.
The Ukraine war and subsequent sanctions put on Russian oil has also caused a spike in gas prices.
