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World Oil Prices Fall Below $100 Over Growth Concerns

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World oil prices continued their freefall yesterday as both Brent and West Texas crude prices fell below $100 per barrel. A number of factors contributed to the decrease in prices.

This includes the resumption of talks between Russia and Ukraine and China’s slowdown due to fresh COVID outbreaks. In addition, the US Federal Reserve is likely to hike interest rates this week.

RELATED: Spiraling Oil Prices Can Lead to Global Economic Destruction

World Oil Prices Fall Below $100

Oil pumping machinery in operation with barrels and digital screen with world map and financial chart | World Oil Prices Fall Below $100

Prices of both Brent and West Texas Intermediate crude continued their downward trend since last week. Both registered prices below $100 for the first time since the Russia-Ukraine conflict erupted.

Brent went down by 6.54% to close at $99.91 per barrel, but not before touching an intraday low of $97.44.

Meanwhile, WTI crude prices fell by 6.38% to end up at $96.44. It also traded lower during the day, hitting $93.52 at one point. Just over a week ago, both Brent and WTI traded over $130 per barrel. 

Growth Concerns Fueled Downtrend In World Oil Prices

Jeffrey Halley, the Oanda senior market analyst, attributed many factors to the decline in world oil prices. One is the newfound hope for renewed negotiations between Russia and Ukraine.

In addition, the Federal Reserve’s anticipated rate hike this week paused any plans for increased demand.

These factors, plus China’s projected slowdown in oil demand due to multiple COVID lockdowns, are keeping world oil prices down.

It seems like the old adage that the best cure for high prices, is high prices, is as strong as ever,” Halley added. He also noted his belief that oil prices have peaked at $130 for now. 

Brent nearly hit $140 a barrel last week while WTI fetched a high off $130.50 a barrel early last week. Buyers panicked at the prospect of the world market losing access to Russian oil, which means even tighter supplies.

So far, however, only the US and Canada announced their plan to wean from Russian oil. Another country, the United Kingdom, announced its plans to phase out Russian energy imports from their country.

Other European countries have yet to indicate their plans to support the Russian oil embargo. 

Trading On Hope

The initial spike that allowed world oil prices to hit $130 was borne to supply fears. “It’s really a market that traded entirely on fear,” said Rebecca Babin, senior trader at CIBC Private Wealth. “Now, without a true change in the facts, we’re trading on the hope that things won’t be as bad.”  

Babin added that the full impact of the Ukraine-Russia war remains anybody’s guess. “We don’t have a lot of clarity around what is really going to happen with crude supplies in the future as a result of this conflict,” she added.

Despite Bans, Russian Oil Still Has Buyers

Even as sanctions reduced the number of countries buying oil from Russia, the country still has buyers. This includes India and China, which are among the top consumers of crude oil worldwide. 

In addition to Russia’s impact, oil prices are also anxious about a possible China slowdown. Fresh outbreaks in major cities forced Beijing to impose lockdowns, which can affect local manufacturing and shipping schedules.

China is the world’s largest oil importer. Any slowdown in its industrial machinery will definitely impact prices. 

World Oil Prices Remain Volatile

This month, world oil prices are especially volatile. Prices of both Brent and West Texas continue to seesaw on every new political, financial, or COVID concern.

Tamas Varga from brokerage PVM posed a question about the situation. “Is it the mother of all corrections or the market is turning increasingly confident that a significant supply shock will be avoided?”

More importantly, will the drop in oil prices bring down the price of fuel in countries? The US is currently experiencing historical highs in pump prices.

Pump prices hit an average of $4.43 last weekend, its highest recorded price ever. However, prices eased slightly since then. Now, the average cost for a gallon of gas last Tuesday stood at $4.316. 

Watch the Bloomberg Markets and Finance video reporting that oil prices retreat as Ukraine says it’s willing to compromise to end the war:

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