Crude oil prices rallied in the afternoon after a rocky start to the trading day, with Brent crude finishing out the day at $106.57.
Earlier in the trading day, Brent fell to $103.88 as the market weighed the opposing forces of China’s lockdowns and recession fears against tight global oil supplies.
The bearish case has focused on covid disruptions in China, which just identified over the weekend its first Omicron subvariant BA.5.21 in Shanghai. The zero-covid policy in the world’s largest crude oil importer sparked fears of decreased oil demand. Further limiting oil’s gains are fears of a recession in the United States.
But oil prices have remained elevated on tight supplies, waning crude inventories, and concerns that OPEC—specifically Saudi Arabia—doesn’t have the spare capacity that some think it has. The fear that sanctions against Russia, which is set to go into effect at the end of this year, could take too many oil barrels out of the market is compounding those fears, with no real plan in place to replace lost Russian oil barrels.
The price of WTI clawed back some gains as well as Monday. After sinking to just over $101 per barrel earlier on Monday, the price of WTI rose to $103.57 at the close of the trading day.
WTI is still trading down nearly $17 per barrel from a month ago, with Brent trading down $!6 per barrel in that timeframe. Gasoline prices in the United States have fallen as well, with the recession fears lending significant weight and providing relief to the Biden Administration, which has been desperate to lower gasoline prices ahead of mid-term elections this fall.
U.S. average gasoline prices fell to $4.678 per gallon on Monday, down from $5.004 a month ago.