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Crude Oil Prices Crash 9 Percent To Less Than $100 In A Single Day On Recession Fears

Crude Oil Prices Crash 9 Percent To Less Than $100 In A Single Day On Recession Fears

oil prices

A customer pumps diesel fuel at a Madison, Miss., Sam's Club, May 24, 2022. (AP Photo/Rogelio V. Solis)

Crude oil prices tumbled 9 percent on Tuesday with the U.S. benchmark hitting less than $100 as the recession stoked fears that an economic slowdown will hurt the demand for petroleum products.

Products made from crude oil include gasoline, diesel fuel, heating oil, jet fuel, petrochemical feedstocks, waxes, lubricating oils, and asphalt. 

High oil prices are considered a major contributor to rising inflation, which is at a 40-year high. The national average price of gas at the pump hit a high of $5.016 on June 14. Drivers were paying $4.80 on average per gallon of gas on July 5.

West Texas Intermediate crude, the U.S. oil benchmark, crashed more than 10 percent at one point Tuesday, and was trading at $98.59 per barrel as of this writing after hitting $130.50 in March. Brent was trading at $102.16 after coming close to $140 per barrel.

″(T)he oil market appears to be homing in on some recent weakening in apparent demand for gasoline and diesel,” energy research consultant Ritterbusch and Associates wrote in a note to clients. The company attributed the price movement to “tightness in global oil balances increasingly being countered by strong likelihood of recession that has begun to curtail oil demand.”

Prices have been high since before Russia invaded Ukraine on Feb. 25, 2022, due to tight supply and growing demand. This raised concerns about global energy shortages as Russia is one of the biggest oil exporters, especially to Europe.

Fears of a recession have been exacerbated by interest-rate hikes from the Federal Reserve.

If the economy goes into a recession, Brent could fall to $65 by the end of 2022, Citi said in a note to clients. Citi has been bearish about oil at a time when other firms, such as Goldman Sachs, predicted that oil would hit $140 or more, CNBC reported.

Oil prices have taken a hit from a resurgent dollar, which is at a 20-year high against the euro and holding multi-month peaks against other major currencies, Reuters reported. A stronger U.S. dollar usually makes oil more expensive in other currencies, which could dampen demand.

Photo: A customer pumps diesel fuel at a Madison, Miss., Sam’s Club, May 24, 2022. (AP Photo/Rogelio V. Solis)