Workers extract oil from oil wells in the Permian Basin in Midland, Texas.
Benjamin Loewy | Getty Images
U.S. crude fell more than 8% on Monday, falling below $100 a barrel, amid talks between Russia and Ukraine and new restrictions in China that could dampen demand.
Futures for West Texas Intermediate crude, the US oil benchmark, shed 8.75% to trade at $99.76 a barrel. The international benchmark Brent oil fell 8% and is trading at $103.68 per barrel.
Rebecca Babin, senior energy trader at CIBC Private Wealth US, attributed the decline to a combination of geopolitical and demand factors. Russia and Ukraine were due to resume peace talks on Monday, while China’s March demand is due to be revised down due to new Covid restrictions. In addition, open interest in futures for Brent crude oil has decreased, which means that financial players reduce the risk.
“Today’s action reflects a shift in sentiment in Russia/Ukraine forcing traders to sell, fundamental demand concerns driven by China’s Covid lockdown forcing fundamental traders to take profits, and technical pressure as oil breaks through key levels,” Babin said.
Monday’s sell-off builds on last week’s decline when WTI and Brent recorded their worst week since November.
Oil surged above $100 in late February when Russia invaded Ukraine, raising fears that supplies would be disrupted in an already tight market. It was the first time oil has crossed triple digits since 2014.
And the climb didn’t stop there. Last week, WTI traded as high as $130.50 and Brent almost hit $140.
The market was flipping between gains and losses at a time that was particularly volatile for oil prices. The surge sent the national average for a gallon of gas to the highest on record, not adjusted for inflation, raising concerns about inflation in the economy.
Even with Monday’s drop, Brent and WTI prices are still up more than 30% for the year.
“For the first time in a long time, demand scares us,” said John Kilduff, partner at Again Capital. “The Covid lockdown in China has spooked the market,” he added, noting that high global fuel prices are also causing demand to fall.