By Barani Krishnan

Investing.com — Oil prices set the stage for a fourth week of losses Monday, while inflation fears dominated markets. 

A spike in U.S. Treasury yields and notable economist and fund manager’s Mohamed El-Erian’s dismissal of talk that $100 pricing would be the way forward for crude added to the bearish undertone in energy.

The benchmark U.S. crude oil price was $78.30, down 26c or 0.3$ at 1:45 ET (23:45 GMT). WTI lost 4% in the last three weeks, after having gained a net 30% during the preceding seven months. U.S. crude benchmark reached seven-year highs of $85 in October and continues to rise 64% over the previous year.

The London-traded oil benchmark, WTI, dropped 0.5% to $81.80 after a lower intraday high of $80.67. Brent lost 4% over the past three weeks, just like WTI. Global benchmark Brent reached a record-breaking $86 for three years and is still up 58% year to date.

Between mid-March and end-October, oil rallied without interruptions, adding about $20 a barrel as OPEC, the producer group, and its allies, continued to block the supply market amid soaring energy demand from countries recovering from the Covid-19 pandemic.

Oil bulls had delighted then in OPEC+’s continuous rebuffing of the Biden administration’s plea for more oil above the miserly 400,000 barrels per day addition offered by the alliance. 

However, three weeks ago the drumbeat for oil-bulls stopped as the White House declared that it would stop any inflation, particularly at crude prices, from slowing U.S. economic growth. 

The administration’s caution took on an added tone of gravity after the Labor Department reported last week that the U.S. Consumer Price Index, which represents a basket of products ranging from gasoline and health care to groceries and rents, rose 6.2% during the year through October.  The acceleration was largely due to the seven-year-high gasoline prices.

U.S. market fell further Monday after the key indicator of interest rates hit an all-time high of 1.62% three weeks ago. That suggested that the Federal Reserve may have to dump its “we’re-patient-for-now” stance over inflation and raise rates faster than its planned timeline of between July and December 2022.

El-Erian, chief economic advisor at Allianz (DE:) Allianz and chair of Gramercy Fund Management, added to the dark clouds when he dismissed suggestions that crude at above $100 per barrel would be the way of the future.

“If you were to focus only on the supply side, you could get to oil at $100, because there has been underinvestment in the industry in general, and demand will stay robust,” El-Erian said.

“But if you look at what is happening on the demand side, there you get some questions. Demand is robust today but will it be robust in six months’ time? There (are) really big questions in terms of demand destruction — people buying less because prices are higher — and in terms of whether policy becomes contractionary or not.”

While he’s widely respected for his knowledge of the economy during his time as CEO at U.S. bond market giant PIMCO, El-Erian is not necessarily known for his insights into oil. His comments Monday were a further weight on the energy markets, as he expressed concern about counter-actions to the Biden administration’s oil rally.

The White House has so far indicated that it may release oil from the U.S. Strategic Petroleum Reserve or impose a ban of U.S. crude exports — bringing back a 40-year embargo lifted in 2015 — to ensure adequate supply at home.  Experts from the sector say that both of these measures might not be successful due to the high demand for energy.