Q&A: Why have oil prices dropped below $100 per barrel again?
Oil prices dipped dramatically today, with markets increasingly influenced by volatile geopolitical events.
While intensifying conflict in Russia saw prices spike to 14-year highs, multiple headwinds have caused Brent and WTI Crude to fall below $100 once more, after three weeks above the milestone.
Q: What developments are driving down prices?
Both major benchmarks – Brent and WTI Crude – are enduring wild swings this year, and have become increasingly influenced by volatile geopolitical developments that affect both supply and demand.
Most notably, renewed talks between Russia and Ukraine have eased fears of disruption, although it is unclear how much progress has been made so far.
Q: Is it just Russia-Ukraine tensions affecting prices?
No. The increased prospect of the aborted US-Iran deal being revived has boosted hopes of fresh supplies into the market.
Meanwhile, the EU’s decision to not follow the US and UK with energy sanction, and the growing possibility India will take up an offer to buy discount oil supplies from Russia, also means the Kremlin is less isolated than the West initially hoped.
Q: What about demand?
Rebounding demand characterised last autumn’s rallies, however China is now reporting surging Covid-19 cases – which is likely to put a dampener on oil consumption in Asia.
Q: Anything else to think about?
It’s worth noting oil markets are still tight amid sustained underperformance from OPEC+, meaning another future rally is far from implausible.
For a more in-depth report, read below: