Just when you thought oil prices would keep skyrocketing, they fell back below $100 a barrel in Monday trading and into early Tuesday in the Asian markets.
According to CNBC, the price for West Texas Intermediate, the U.S. benchmark, decreased to $99.76 a barrel on Monday before popping back above $100. That was a near 9 percent drop. Meanwhile, Brent crude, the international benchmark, fell to $103.68. And that was an eight percent decrease.
West Texas crude fell again to below $100 in the Asian markets. It did the same in U.S. futures, indicating a possible drop in the American market when it opens Tuesday morning.
The 4-1-1 on Why Oil Prices Are Down
- Oil prices briefly dropped to below $100 a barrel in Monday trading.
- China put more than 50 million citizens under lockdown because of Covid. That dropped demand for oil.
- Traders took note that officials with Russia and Ukraine are talking again.
- Average gas prices also dropped by penny after reaching an all-time high last week.
Of course, the prices are fluid. After hitting session lows, the prices bounced back above $100, hovering at around $102 a barrel.
Meanwhile, there was a tiny speck of good news on the price of gas. Here’s our definition of tiny. Try a penny. According to AAA, which surveys prices across the country, the national average dropped to $4.32. On Friday, it was a record $4.33. For context, A week ago, the average price was $4.06. And just a month ago, it was $3.49. This next fact hurts. This time a year ago, a gallon of gas cost an average of $2.86. Good times.
It all begs the question — what’s going on with oil prices? Why did they race up only to fall back, especially after the United States announced it was boycotting Russian oil.
So many factors are influencing the price. On Monday, traders acknowledged the talks between Russia and Ukraine to possibly end that conflict. Plus, a chunk of demand dropped out of the driving market.
If you missed the news, China put more than 50 million residents on lockdown to contend with rising cases of Covid-19. Think of your last economic class. When demand drops, then prices go down.
Prices already were going up before Russia invaded Ukraine last month. But the conflict was like throwing gas on a slow-burning price. Oil prices shot above $100 a barrel in late February. It’s the first time they’d cracked $100 since 2014.
And if you know your oil history, then 2014 also is a memorable year for another reason. Oil prices started plummeting soon after they crossed the $100 mark. By year’s end, the price of gas responded by a $1 per gallon drop.
Also last week, after prices climbed to as high as $130.50 for WTI, they fell back. Percentage-wise, it was the worst week for oil prices since November.
There are signs that domestic oil companies are increasing production. There were 663 working rigs for oil and natural gas in the United States as of last Friday. About half of those rigs were in Texas. CNBC said the national rig count has increased in nine of the past 10 weeks.