Oil plummets below $100 as recession risks come to forefront

Oil prices tumbled Tuesday with the U.S. benchmark falling below $100 as recession fears grow, sparking fears that an economic slowdown will cut demand for petroleum products.

West Texas Intermediate crude, the U.S. oil benchmark, slid 8.4%, or $9.14, to trade at $99.29 per barrel. The contract last traded under $100 on May 11. International benchmark Brent crude shed 9.1%, or $10.34, to trade at $103.16 per barrel Tuesday.

Oil was pressured in a low liquidity session on Tuesday as equities fell and the dollar surged, making commodities priced in the currency less attractive. Citigroup Inc. said that crude could fall to $65 this year in the event of a recession, a call in stark contrast to JPMorgan Chase & Co.’s most bullish $380 a barrel scenario.

“The market is getting tight, but still we’re getting creamed and the only way you can explain that away is fear of recession in every risk asset,” said Robert Yawger, director, energy futures at Mizuho, New York. “You’re feeling the pressure.”

In the euro zone, data showed business growth across the bloc slowed further last month, with forward-looking indicators suggesting the region could slip into decline this quarter as the cost of living crisis keeps consumers wary.

In South Korea, inflation hit a near 24-year high in June, adding to concerns about slowing economic growth and oil demand.

Supply concerns still linger, initially lifting WTI and Brent earlier in the session, due to potential output disruption in Norway, where offshore workers began a strike.

The strike is expected to reduce oil and gas output by 89,000 barrels of oil equivalent per day (boepd), of which gas output makes up 27,500 boepd, Norwegian producer Equinor has said.

Saudi Arabia, the world’s top oil exporter, raised August crude oil prices for Asian buyers to near record levels amid tight supply and robust demand.

Meanwhile, Russia’s former President Dmitry Medvedev said a reported proposal from Japan to cap the price of Russian oil at about half its current level would mean less oil on the market and could push prices above $300-$400 a barrel.

G7 leaders agreed last week to explore the feasibility of introducing temporary import price caps on Russian fossil fuels, including oil, in an attempt to limit resources to finance Moscow’s “special military operation” in Ukraine.