Oil fell more than 8%, hitting a low of $99.76 a barrel. This means that oil has lost nearly a quarter of its value since it touched a 14-year high of $130.50 a barrel on March 6.
It is the first time that oil has traded below $100 since March 1.
“This is a hell of a correction,” said Tom Cluza, global head of energy analysis at Oil Price Intelligence.
Brent crude, the global benchmark, fell more than 7% to $104.35 a barrel in recent trading. This is a sharp decline from the recent peak of $140 per barrel.
“You’re seeing some pretty naughty selling,” said Matt Smith, chief oil analyst for the Americas at Kpler.
Despite the recent sell-off, oil is still up more than 30% over the year.
What does this mean for gas prices
However, a dip to $100 should cool prices at the pump, which is moving as oil lags.
Kloza said that if oil prices remain at current levels, the average national price of regular gasoline is likely to fall by about 20 cents a gallon. That could mean gas prices are still high — well over $4 a gallon nationally — but below record levels.
Unfortunately, any relief at the pump may not last for long.
Klosa still expects gasoline prices to rise in the spring and summer as demand picks up, with the national average rising to about $4.50 a gallon.
“It’s just going to be a road trip,” Kluza said.
Ryan Fitzmaurice, energy strategist at Rabobank, similarly believes that oil prices have yet to set their highest levels in the current cycle.
“Eventually, we’ll see new highs before all is said and done,” Fitzmaurice said. “Given Russia’s size and importance, we will most likely break through the all-time highs set in 2008.”
Covid lockdowns in china
“Coronavirus has taught us that you cannot count on a stable outcome,” Kloza said. “Just when you think people will go back to normal behavior, here it comes.”
Oil traders are also watching the developments of the war in Ukraine, including the continuation of negotiations between Ukraine and Russia. A ceasefire could ease concerns about a prolonged disruption to oil flows from Russia, the world’s second-largest oil producer, last year.
However, old energy experts cautioned against reading too much into the headlines about the negotiations between Russia and Ukraine.
“I am very skeptical about the success of any kind of negotiation here, period,” said Robert Yauger, vice president of energy futures at Mizuho Securities.
Even in the event of a ceasefire, Yauger said, the West is unlikely to quickly lift sanctions against Russia: “The sanctions are not going away any time soon.”