CNN

Oil drops below $100 a barrel for first time since early May

Jul 5, 2022, 4:28 PM

A person pumps gas at a Shell gas station on April 01, 2022, in Houston, Texas. The Biden administr...

A person pumps gas at a Shell gas station on April 01, 2022, in Houston, Texas. The Biden administration announced Thursday that the U.S. will release up to one million barrels of oil per day from the United States’ strategic petroleum reserve. The move is geared towards lessening the impact of rising gas prices amid Russia's invasion of Ukraine. “The scale of this release is unprecedented: the world has never had a release of oil reserves at this 1 million per day rate for this length of time,” the White House said. (Photo by Brandon Bell/Getty Images)

(Photo by Brandon Bell/Getty Images)

(CNN) — For the first time in nearly two months, crude oil prices have fallen below $100 a barrel, reflecting investors’ growing concerns about a US recession that could crimp demand for oil.

The price of West Texas Intermediate crude tumbled as much as 10% Tuesday, to hit a low of $97.43 before closing at $99.50, down 8% on the day. Brent crude oil was down by more than 10% when it hit a low for the day of $101.10 a barrel, before settling at $102.77 at the close.

It’s the first time that WTI has been below $100 since May 11. That was also the last time Brent, which typically trades a bit higher, was below $102 a barrel. Brent has not been below $100 since April 25.

Wholesale gas futures fell as well, down almost 10% for the day at the close, or 36 cents a gallon.

The national average cost of a gallon of gas at the pump is now $4.80, according to the latest AAA reading, down one penny from Monday and 8 cents from a week ago. Gas prices crossed the $5 mark for the first time on June 11 and hit a peak of $5.02 a gallon on June 14.

Oil CEOs call for ‘tone shift’ from White House on finger-pointing over gas prices

Rising fears about the chances of a recession are the primary driver of the latest sell-off in oil and gasoline futures, said Tom Kloza, global head of energy analysis for OPIS.

Until fairly recently, oil and gasoline investors had believed that there was little in the way of market forces to keep prices in check in the near term. “There is now a perceived huge downward risk tied to recession risk,” he said.

There have been mounting fears of a recession in recent weeks, which has helped take oil prices sharply lower. Brent was at $123.58 a barrel on June 8, while WTI was at $122.11. But since that peak, the Consumer Price Index showed consumer prices hit a 40-year high, one of the key metrics that prompted the Federal Reserve to hike interest rates by three-quarters of a percentage point as a way of combating those price pressures. That has raised expectations that the central bank’s aggressive moves to cool the economy could cause job losses and a recession.

Oil and gas prices surged earlier this year after Russia’s invasion of Ukraine prompted the United States and its European allies to sanction Russian energy exports, effectively choking off one of the world’s largest producers.

But the supply of oil is only part of the equation traders consider when bidding on oil futures. Demand is the other part. And nothing kills demand like a recession, which reduces economic activity overall. When people get laid off, there are fewer people driving to work or to the store or other destinations.

The previous time gas hit a record high was during the Great Recession, when the national average reached $4.11 a gallon in July 2008. But by the end of that year, it had fallen 60%, to $1.62 a gallon, as demand plunged. But cheap gas was of little consolation to the nearly 3 million people who lost their jobs during those five months.

OPEC agrees to pump more oil as Russian output drops

So far, drivers have seen relatively little relief at the gas pump from the recent fall in oil and gasoline futures. The national average price of gas has fallen only 4%, or 22 cents, since the June 14 record, while wholesale gas futures have dropped 22% since topping out at $4.28 a gallon on June 9.

US gasoline retailers have little incentive to cut prices more deeply with strong demand for gasoline with the summer driving season in full swing.

“There’s no compelling reason for retailers to lower their price more with this strong demand,” said Kloza.

There could be more price drops at the pump in the near term — a decline of another 10 cents a gallon in the next week or so wouldn’t be a surprise, Kloza said. Station owners who are paying less for wholesale gas will be watching to how much of the savings their competitors are passing on to customers before they set their own prices. But the expression that gas prices go up like a rocket and come down like a feather is likely to play out once again, Kloza said.

There likely won’t be any big declines until schools reopen and the summer driving season ends this fall, he predicted. There are also risks that further developments in Russian oil exports tied to the war in Ukraine or hurricanes hitting US oil infrastructure along the Gulf Coast could send prices climbing up rapidly once again.

“I wouldn’t put away the fives used in gas price signs quite yet,” he said.

The-CNN-Wire™ & © 2022 Cable News Network, Inc., a WarnerMedia Company. All rights reserved.

KSL 5 TV Live

CNN

Traffic moves on I-15 in Salt Lake City on Thursday, May 18, 2023. (Spenser Heaps, Deseret News)...

Bryan Mena, CNN

Americans are expected to splurge on travel this summer — again

Millions of Americans have taken to the skies, hit the road, fired up the barbecue grill and jumped into the pool this weekend to celebrate the start of summer 2024. Analysts are expecting the Memorial Day weekend to usher in yet another summer of strong consumer spending on travel and other leisure activities.

5 hours ago

Sam Lemon, right, speaks during a news conference with Susie Williams Carter, center, and lawyer Mi...

Alisha Ebrahimji, CNN

A Black teen wrongfully executed for murdering a White woman in 1931. Now, his family is suing to defend his name

More than 90 years after Alexander McClay Williams was wrongfully executed, his family is suing the Delaware County, Pennsylvania, for damages, alleging he was sentenced to the electric chair for a crime he did not commit.

7 hours ago

Passengers check in at San Francisco International Airport on May 24, 2024 in San Francisco, Califo...

Rebekah Riess, CNN

TSA sets new record Friday for most travelers screened in a single day

The Transportation Security Administration (TSA) announced that it set a new record for most travelers screened in a single day on Friday, according to a post from the agency on X, formerly known as Twitter.

1 day ago

President Joe Biden at the US Military Academy commencement ceremony in West Point, New York, on Ma...

Aileen Graef, Athena Jones and Shania Shelton, CNN

Biden touts expansion of NATO and actions in the Middle East during West Point commencement

President Joe Biden touted the expansion of NATO, his actions in the Middle East and progress in lowering military sexual assaults in a commencement address to the West Point graduating class Saturday.

1 day ago

Local police have warned residents to keep their pets inside and not to approach the animal. (Tiffa...

Rebekah Riess and Zoe Sottile, CNN

A pet primate is on the loose in South Carolina

South Carolina authorities are searching not for a fugitive prisoner or a stolen vehicle, but rather for a resident’s wayward primate

1 day ago

People gather at the site of a landslide in Maip Mulitaka in Papua New Guinea's Enga Province on Fr...

Heather Chen, Alex Stambaugh, Edward Szekeres and Manveena Suri, CNN

More than 100 feared dead in remote region of Papua New Guinea hit by deadly landslide

More than 100 people are feared dead in a remote village in the Pacific nation of Papua New Guinea after a landslide flattened homes and buried people alive while they were sleeping, officials said Friday.

2 days ago

Sponsored Articles

Electrician repairing ceiling fan with lamps indoors...

Lighting Design

Stay cool this summer with ceiling fans

When used correctly, ceiling fans help circulate cool and warm air. They can also help you save on utilities.

Side view at diverse group of children sitting in row at school classroom and using laptops...

PC Laptops

5 Internet Safety Tips for Kids

Read these tips about internet safety for kids so that your children can use this tool for learning and discovery in positive ways.

Women hold card for scanning key card to access Photocopier Security system concept...

Les Olson

Why Printer Security Should Be Top of Mind for Your Business

Connected printers have vulnerable endpoints that are an easy target for cyber thieves. Protect your business with these tips.

Modern chandelier hanging from a white slanted ceiling with windows in the backgruond...

Lighting Design

Light Up Your Home With These Top Lighting Trends for 2024

Check out the latest lighting design trends for 2024 and tips on how you can incorporate them into your home.

Technician woman fixing hardware of desktop computer. Close up....

PC Laptops

Tips for Hassle-Free Computer Repairs

Experiencing a glitch in your computer can be frustrating, but with these tips you can have your computer repaired without the stress.

Close up of finger on keyboard button with number 11 logo...

PC Laptops

7 Reasons Why You Should Upgrade Your Laptop to Windows 11

Explore the benefits of upgrading to Windows 11 for a smoother, more secure, and feature-packed computing experience.

Oil drops below $100 a barrel for first time since early May