Crude oil prices plunged more than 7 percent on Tuesday as the American and world benchmarks fell below $100 a barrel.
The Chinese economic outlook, dimmed by lockdowns to contain Covid-19 outbreaks, appeared to be the major cause of the decline, along with increasing signs of a global economic slowdown. China is the world’s leading oil importer, and the second-largest consumer after the United States.
In addition, while demand may be weakening, supplies have withstood the strains spurred by Western sanctions against Russia, which has found new markets for its oil and petroleum products in China, India and South America.
“We’re past the point where the market was tightest, and I think from here we’re going to see oil inventories rising and prices moderate,” said Michael Lynch, president of Strategic Energy and Economic Research, an analytics firm. “China is a big part of it. They have been carrying oil demand for 10 years.”
The price of West Texas Intermediate, the U.S. benchmark, dropped 8 percent to $95.84 a barrel, while Brent crude, the international standard, declined 7.1 percent to $99.49. Brent briefly fell below $100 last week before rebounding. Oil prices surpassed $120 a barrel last winter after Russia invaded Ukraine.
Gasoline prices are also falling, though it takes a week or more for motorists to benefit from drops in the oil price. This is because petroleum travels through several stages of processing and marketing before it is sold at retail outlets.
The national average for regular gasoline dropped to $4.66 a gallon on Tuesday, nearly 2 cents below Monday’s price, according to the AAA motor club. Prices have fallen 14 cents over the last week and 35 cents over the last month, but are roughly $1.50 higher than a year ago.