Oil Falls Below $100 Per Barrel For First Time Since May As ‘Strong Likelihood Of Recession’ Hurts Demand

If an economic downturn reduces demand for oil, prices could fall to as low as $60 a barrel by the end of the year, according to some experts.

The price of U.S. benchmark West Texas Intermediate slid 9% to trade at around $98 per barrel, while international benchmark crude now sits at just over $102 per barrel

The last time oil traded at less than $100 per barrel was in May, and even though prices rose from there, experts worry that a recession will hurt global demand.

Despite the recent drop in prices, oil is up 15% this year, hitting a high of nearly $140 per barrel in March after Western nations imposed sanctions on Russian energy imports.

If the economy does fall into a recession, oil prices will fall to $60 by the end of 2022, according to analysts at Citigroup.

With a downturn, demand declines and excess supply will likely hurt prices, according to a note by Citigroup strategists.

Edward Moya, senior market analyst at Oanda, says that oil shouldn't go much lower despite the recent declines: "Recession fears are killing the crude demand outlook, but with prices roughly 18% lower from the March high, oil shouldn't go much lower."

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The surge in oil prices earlier this year has begun to curb oil demand as a result of the strong likelihood of a recession.

Crucial Quote:

As investors grow more somber about the economic outlook and Europe faces enormous gas price risks, oil prices are extremely weak.

Tangent:

The Euro fell to its lowest point against the dollar in 20 years. The currency has taken a hit as soaring gas prices from Russia's war in Ukraine send recession fears higher and central banks scramble to raise interest rates. Inflation in the Euro zone reached a record 8.6% in June. Even as the Federal Reserve raises interest rates, the U.S. dollar remains strong. Mark Zandi, chief economist at Moody's Analytics, says that the spike in oil and other commodity prices has caused painfully high inflation around the world.

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