U.S. oil tumbles more than 8%, dips below $100 per barrel
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Permian Basin drilling rigs in 2020 as U.S. crude-oil production declined by 3 million per day because Wall Street pressure forced reductions.
Paul Ratje | Afp | Getty Images
U.S. oil tumbled more than 8% on Monday, breaking below $100 per barrel, amid talks between Russia and Ukraine as well as new lockdowns in China — which could dent demand.
West Texas Intermediate crude futuresOil benchmark in the United States, US, fell 8.75% to close at $99.76 per barrel. International benchmark Brent crudeTraded at $103.68/barrel after a drop of 8%
Rebecca Babin (CIBC Private Wealth U.S. senior energy trader) attributed the drop in demand and geopolitical factors. Russia and Ukraine are expected to resume peace negotiations on Monday. Meanwhile, China’s March demand will be reduced due to Covid lockdowns. Financial players have been reducing the risk by lowering open interest in Brent futures.
Babin said, “Today’s action reflects an shift in sentiment Russia/Ukraine which causes sentiment traders sell, fundamental worries around demand coming out of China’s Covid Lockdowns causing principal traders to take profits and technical pressures when crude breaks significant physiological values.”
Monday’s selling off builds upon the decline last week, in which Brent and WTI recorded their worst week since November.
Late February saw oil rise to over $100, as Russia invaded Ukraine. There were fears of disruptions in supply in an already tight market. Since 2014, it was the first time that oil had surpassed the triple-digit threshold.
It didn’t end there. Brent was close to $140, while WTI reached $130.50.
In an extremely volatile oil price environment, the market is bouncing between losses and gains. This surge in gas prices has made the national average gallon for gasoline the highest ever recorded, without inflation adjustment. It is increasing inflationary worries across the country.
Despite Monday’s fall, Brent and WTI still have more than 30% annual growth.
John Kilduff (partner at Again Capita) stated that there is a “demand scare” for the first-time in quite some time. He said that the Covid lockdown in China had “spooked” the market, while noting that rising fuel prices are also creating demand destruction.
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