Oil Plunges To Lowest Level Since January—Here’s Why Experts Say Low Prices Won’t Last

Oil prices fell for a fourth week in a row on Friday to their lowest level since January on fears that a looming economic downturn will hurt demand.

The price of U.S. benchmark West Texas Intermediate slid 5% to trade at $79 per barrel, its lowest point since January. The price of international benchmark Brent crude is on track for its lowest close since January.

It was the fourth week in a row that both crudes were in oversold territory and the worst losing streak since December.

Widespread recession fears have been weighing on energy prices but also slammed the stock market, with the S&P 500 falling back into bear market territory on Friday. The major indexes set new lows for the year.

The U.S. Dollar is seen as a safe-haven asset. The ICE U.S. Dollar Index, which tracks the Dollar against a basket of other currencies, reached its highest level in over a decade.

With the Federal Reserve raising interest rates by 75 basis points for a third consecutive policy meeting on Wednesday, central banks around the world have followed suit. A chorus of central bank commitments to fight inflation has caused global economic growth concerns to hit panic mode.

He says that the dollar rally is about to enter another level that could keep the pressure on commodities.

The S&P 500 energy sector fell more than six percent on Friday for its worst day since May. Thanks to a surge in oil prices earlier this year, the sector has risen over 20% this year, which is more than the S&P 500's decline.

As oil prices have fallen, some investors may want to cash out. This is a crowded space with a lot of nervous longs sitting on healthy year-to-date gains that they're eager to lock in.

The price of oil is expected to rebound in the long term. Global supply could be further limited as a result of the sanctions on Russian energy. As a result, many of Wall Street's biggest banks are predicting a rebound in prices during the fourth quarter.

Economic activity isn't falling off a cliff despite all the bearishness that is hitting oil prices He thinks that the price of crude could fall to $74 per barrel if the selling continues.

As the European Union prepares to impose sanctions on Russian oil in the coming months, oil prices will come under renewed upward pressure. While some of the EU's Russian oil imports will be diverted to other countries, "filling the void in oil supply could prove difficult, at least soon enough to avoid a jump in prices," he says.