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.
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.”
But the supply of oil is only part of the equation that traders take into account when bidding on oil futures contracts. 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.
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.
“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.
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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