Fears of a global recessionAnd if those concerns materialize this year, the price of crude oil could drop to $65 a barrel, according to Citigroup.
“So far, we’re not in a recession environment,” Ed Morse, the bank’s global head of commodity research, told CBS MoneyWatch. Some countries’ economies are slowing more than others, he said, but the world as a whole is not in a recession – a scenario more unlikely than not this year.
Morse and his team currently present a 40% chance of a global recession, defined as two consecutive quarters of a collective decline in global GDP.
Fears that the global economic slowdown has dampened the world’s appetite for crude, with oil futures dropping below $100 a barrel on Tuesday for the first time since May 11, and remaining low on Wednesday.
Ideas earlier this year thatIt would disrupt global oil supplies, however, not over. Instead of conflict and the resulting sanctions that limit oil supplies, it has created a two-tiered market, according to Morse. “What Russia has been able to do is find new customers, and they are selling at a discount of 30% to 40%,” the analyst said.
As G7 countries and the European Union phase out Russian oil imports, Moscow has increased its exports of crude and petroleum products at a discount to other buyers, including China and India. Meanwhile, Europe is raising prices for oil produced by other countries amid sanctions banning Russian crude. Morse noted that Saudi Arabia decided not to compensate for the shortfall from Russia.
The drop in oil prices follows afrom record highs recorded in June, with regular gasoline now selling for less than $5 a gallon at the majority of US stations.
Prices should drop to less than four dollars a gallon at thousands of stations across the country in the coming days and weeks, according to GasBuddy analyst Patrick de Haan.
“Most of the stops that could drop to $3.99 or less will be in states like South Carolina, Georgia, Mississippi, Louisiana, Arkansas, Texas, Alabama, Tennessee, North Carolina…,” DeHaan said in a tweet.
The national average for a gallon of gas on Wednesday I stood in $4.78, down 9 cents over the past week in a drop in prices he attributes AAA mostly to fewer people being stoked over the past two weeks.