Oil prices fall below $95 for the first time since the invasion of Ukraine
Oil prices fell below $95 a barrel for the first time since Russia invaded Ukraine, as fears of a looming global recession plague commodity markets and hurt demand forecasts.
Both major crude benchmarks fell more than $5 a barrel on Thursday, or more than 5%, adding to a broad rout over the past six weeks.
Brent, the international benchmark, fell to $94.50 a barrel. It closed at $96.84 on February 23, the day before Russia invaded Ukraine. US marker West Texas Intermediate fell to $90.56, below its pre-war close of $92.10.
“Recession fear is driving the market today,” said Dennis Kissler, senior vice president of trading at BOK Financial.
Russian President Vladimir Putin’s full-scale invasion of Ukraine sent prices higher earlier this year, with Brent and WTI briefly trading above $130 as Western nations retaliated by imposing sanctions on Russia, one of the world’s largest exporters.
But recessionary jitters and the prospect of the US Federal Reserve stifling growth with more aggressive interest rate hikes have since halted the recovery. Crude prices have fallen by about a fifth since mid-June as traders brace for a sharp drop in consumption.
“The market is very concerned that the destruction of demand due to the recession will dampen growth,” said Robert Yawger, executive director of energy stocks at Mizuho.
Oil hasn’t been the only commodity to run out of steam in recent weeks. Many of the price spikes that helped drive high levels of inflation have also collapsed. Both copper and iron have fallen by around a third since their spring peaks.
“They’re all collapsing,” said Stephen Schork, editor of the oil market newsletter The Schork Report. “Commodities are your best economic indicator and what they indicate is the pain down the road for this economy.”
High oil prices have put pressure on the administration of US President Joe Biden, whose poll numbers have plummeted as motorists face near-record prices at the pumps.
Biden is due to travel to Riyadh on Friday for his first meeting with Saudi Crown Prince Mohammed bin Salman, where he will rely on the kingdom to pump in more oil to drive down prices.
Thursday’s drop came as data indicated high prices were starting to deter U.S. motorists from hitting the road. Figures released Wednesday by the US Energy Information Administration suggest gasoline demand has fallen to its lowest level for this time of year since 1996.
“The rally may have lacked plausible arguments and strong supporting data,” said Paul Horsnell, head of commodities research at Standard Chartered.
“There’s a limit to how often consultants and analysts can just say ‘it’s very tight’ and expect the market to accept it without seeing a lot of data to support the claim.”