The price of West Texas Intermediate (WTI) crude oil has fallen below $100 U.S. a barrel as wild price fluctuations and volatility intensify.
The latest developments to rattle the market are a resurgence of COVID-19 cases in China, the world’s biggest crude importer, and what appears to be progress in cease-fire talks between Ukraine and Russia.
While there are still concerns that the disruption to Russian oil flows is squeezing an already tight market, OPEC and other producers have said there is no global oil shortage right now.
The price of WTI crude oil, the U.S. benchmark, has declined 20% in recent days, dropping from near $130 U.S. per barrel late last week to $97 U.S. a barrel today (March 15). Brent crude oil, the international benchmark, is hovering around $100 U.S. a barrel having risen above $140 U.S. a barrel last week.
The global energy market is in the midst of a liquidity crunch, leaving prices vulnerable to big swings, say analysts. Clearing houses have been increasing margins and making it more expensive to trade the same amount of oil, while open interest has collapsed to the lowest level since 2015.
China’s latest virus outbreak, with growing clusters spawned by the highly infectious Omicron variant in some of its most-developed cities and economic zones, is an unprecedented challenge for the country’s “Covid Zero” strategy.
Separately, Ukraine’s main negotiator said the two sides are working on a potential ceasefire. And, the U.S. and China also had a discussion in their first high-level meeting on the war in Europe. The Federal Reserve, meanwhile, is expected to start tightening monetary policy this week, which is weighing on global financial markets.