Oil price dips below $90 for first time since Ukraine invasion

On Thursday, the price per barrel of oil dropped to its lowest level in February as investors responded to growing worries that a recession would severely reduce energy demand.

One barrel of West Texas Intermediate traded for less than $88 per barrel on Thursday. This is the lowest level it has traded since February.

This was before Russia invaded Ukraine. The invasion pushed oil prices to the highest level for years, causing fears of a wider conflict and sending countries scrambling desperately to replace sanctioned Russian crude.

After peaking at nearly $140 a barrel in March, oil has been sliding steadily lower ever since, but Thursday’s sell-off was sparked by new data out of the U.S. showing Americans are driving less this summer than they were even two years ago, during 2020 pandemic lockdowns.

Rory Johnston is the founder of Commodity Context. He says that prices for gas are still struggling to recover from the unprecedented surge in demand this year.

“For a big chunk of the summer, gasoline prices were ripping higher and higher or higher and people were … stocking up because they didn’t know how high it was going to go,” he said Interview. “Now prices are falling quickly and it’s turning around.”

Gasoline is one of the main uses of oil, so prices for crude are falling just as they are at the gas pump. But oil is also being driven lower as more and more economic data suggests the global economy is slowing and may go into a recession, which will reduce demand for energy.

Johnston stated, “What we’re witnessing is definitely the whole oil market kinda swooning about some of these worries.” said.

OPEC to increase output

Martin Pelletier is portfolio manager at Wellington-Altus Private Counsel. While there are legitimate reasons to be concerned about a recession in the near future, he believes the outlook will surprise more to the upside than the downside.

He noted that this week, oil cartel OPEC agreed to boost its production by 100,000 barrels a day, something it would not have done if it thought the market was poised to plunge.

“OPEC has a really good understanding of global oil markets, they’re actually increasing their price and output,” he said Interview. “But, that $90 number raises concerns about the direction oil will take from here.”

Johnston states that the current oil price fall can be considered good news or bad news, depending upon your perspective.

“The silver lining of gasoline is certainly cheaper [but] The storm cloud to the other side is lower gas prices as the economy is slowing.