US Oil Ends Below $100 Per Barrel As Fears Of Recession Mount

US Oil Ends Below $100 Per Barrel as Fears of Recession Mount

NEW YORK (UrduPoint News / Sputnik - 11th May, 2022) US oil prices settled below the key $100 per barrel support on Tuesday as recession fears have mounted among Americans amid record high gasoline prices and interest rate hikes planned by the Federal Reserve to curb inflation growing at the fastest pace in 40 years.

New York-traded West Texas Intermediate, or WTI, the benchmark for US crude, settled Tuesday's trade down $3.33, or 3.2%, at $99.76.� WTI hit a session low of $98.91 earlier, marking a two-week bottom since its April 26 low of $97.06.

The US crude benchmark had gained almost 8% in two previous weeks, only to give back almost 10% within the first two days of this week's trading.

Brent crude, the London-traded global benchmark for oil, settled down $3.48, or 3.3%, at $102.46 a barrel, after an intraday bottom at $101.73.

After a 6% rally in two previous weeks on speculation that Europe was converging on a much-awaited ban on Russian oil, Brent conceded 9% week-to-date on growing worries that the United States might fall into a recession.

Tuesday's slump in crude prices came as the American automobile Association reported the average price of gasoline across US pumps at a record high of $4.37 a gallon.

Meanwhile, Federal Reserve officials have been debating the possibility of a 75-basis point (bps) interest rate hike when they meet in June, after instituting increases of 20 bps and 50 bps at their March and May meetings, respectively. Those will be the highest US interest rate hikes in at least a generation.

"There's clearly a huge amount of worry about a recession in the markets at the minute as central banks continue to aggressively tighten against the backdrop of a slowing economy and a cost-of-living crisis," Craig Erlam, analyst at online trading platform OANDA, said.

"There's a lot of pressure on household budgets and it's only going to intensify as the year progresses which will take its toll."

Even so, the unwillingness of the global oil exports alliance OPEC+ to increase production is keeping oil prices "very elevated but at a little over $100, Erlam said, adding that it was "perhaps a sign that we should get used to these higher prices."

Gasoline prices dipped to as low as $4.07 in April s $4.07 a gallon in April after the Biden administration announced the release of unprecedented volumes of crude oil from the US Strategic Petroleum Reserve (SPR) in a bid to reduce the global supply strain heightened by the sanctions on Russia.

President Joe Biden authorized his first major SPR withdrawal in November as oil supplies began tightening amid recovery in demand from the coronavirus crisis that pushed up both crude and US fuel prices.

Over the past two months, the Biden administration has taken 3 million barrels on the average out of the SPR every week to help meet domestic refiners' demand for crude in a market seeing a surfeit in fuel consumption amid strong economic recovery from the two-year long coronavirus pandemic.

The administration's biggest SPR releases commence from this month as it releases a total of 180 million barrels through July - roughly one million barrels per day over the next 180 days.

The US Weekly Petroleum Status Report showed that SPR inventories stood at 550 million barrels during the week ended April 29. That was the lowest level of stockpiles in the reserve since December 2001.

While WTI crude itself has dropped from 14-year highs of $130 to Tuesday's lows of under $100, gasoline prices have stubbornly above the $4 average, prompting Biden to accuse energy companies of price-gouging.