The price drop comes as Saudi Arabia announced a price hike for all grades of its August crude in its prized market, Asia. Saudi Arabia’s price increase comes mainly as expected by the market with strong refining margins and expectations of strong demand.
However, while Saudi Arabia raised the August price of its flagship Asian crude grade, Arab Light, by $2.80 a barrel, the price of Brent crude and WTI crude fell sharply. Saudi Arabia sets the pricing trend for most of the Middle East’s oil exporters and is usually seen as a barrier to the state of the oil market.
WTI crude oil was down $9.01 a barrel by 12:37 p.m. ET below $100 a barrel at $99.42 (-8.31%), while Brent crude was down $10.41 at $103.10 (-9.17%).
Also on Tuesday, a Citi report suggested oil prices could fall to $65 a barrel by the end of this year and $45 by the end of next year if the world goes into recession and demand pools.
According to Citi, oil demand is negative “only in the worst global recessions, but oil prices fall in all recessions at roughly marginal cost.”
In the same report, however, Citi said it does not expect the US economy to fall into recession.
At the complete opposite end of the spectrum, former Russian President Dmitry Medvedev suggested that capping the price of Russian oil at half the current level could cause oil prices to soar above $400 a barrel.
JP Morgan warned this weekend that oil could hit $380 a barrel in a worst-case scenario if Russia starts cutting crude oil production in retaliation for sanctions.
By Julianne Geiger for Oilprice.com
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