Oil Prices Expected to Reach $200 Drop Below $90... 30% Plunge in Just Over Two Months

[Asia Economy New York=Special Correspondent Joselgina] International oil prices, which had been soaring, have plummeted nearly 30% in just two months. Since Russia's invasion of Ukraine earlier this year, oil prices had been projected to reach $200 per barrel, but recently, amid growing concerns over an economic recession, prices have fallen back to double digits. However, ongoing geopolitical tensions mean that oil prices could face upward pressure at any time.

◇ WTI Falls Below $90 Again

On the 15th (local time) at the New York Mercantile Exchange (NYMEX), September delivery West Texas Intermediate (WTI) crude oil closed at $89.41 per barrel, down 2.9% ($2.68) from the previous session. This is the lowest closing price since the 5th of this month. During the session, prices briefly fell below $87 per barrel, marking the lowest level since early February. At the London ICE Futures Exchange, October Brent crude also closed down 3.1% at $95.10 per barrel.

The decline was driven by growing concerns over economic growth due to weak economic indicators from China, the world's largest oil importer. China's industrial production in July increased by 3.8% year-on-year, falling short of market expectations of 4.3%. Additionally, the People's Bank of China lowered interest rates, further heightening economic concerns. Expectations for the restoration of the Iran nuclear deal (JCPOA - Joint Comprehensive Plan of Action) also exerted downward pressure on oil prices.

Market participants cite these recession fears as the primary reason why oil prices, which were projected to reach $200 per barrel just a few months ago, have fallen back to pre-war levels. The WTI closing price on this day represents a roughly 27% drop from the $122 per barrel level in June.

The New York Times (NYT) reported, "When Russia invaded Ukraine last spring, oil prices were expected to reach $200 per barrel. Now, they are below $90," adding, "Prices have fallen about 30%, rendering earlier forecasts obsolete." At that time, Bank of America (BoA) and hedge fund Westbeck projected Brent crude at $200 per barrel, while JP Morgan forecasted $185 per barrel.

◇ Diverging Oil Price Forecasts

Future outlooks are mixed. Ultimately, ongoing geopolitical risks, economic conditions, and unexpected factors such as hurricanes will inevitably influence future oil price movements.

Sarah Emerson, president of analysis firm ESAI Energy, said, "Oil prices could go lower," citing "China reducing oil imports, the end of the (U.S.) driving season, and concerns about a recession."

On the other hand, there are voices warning that energy prices, including oil, could surge at any time. Energy insecurity in Europe amid the Ukraine war is considered a factor increasing demand. The U.S. strategic petroleum reserve releases are scheduled to end by November. Particularly, the market is concerned that if hurricanes damage refining facilities, oil prices could spike sharply. Goldman Sachs recently forecasted that Brent crude prices could rise to the $130 range in the second half of this year.

As oil prices, which have contributed to inflationary pressures, continue to trend downward, expectations for an "inflation peak" theory are gaining momentum. U.S. gasoline prices have fallen for nine consecutive weeks, dropping below the national average of $4 per gallon.