Crude oil prices fell by nearly 7% on Tuesday as fears of a recession mount-a scenario that could put a dent in oil demand.
The plummeting price action comes as Saudi Arabia announced a price hike for all its crude grades in August to its prized market, Asia. Saudi Arabia's price hike comes mostly as expected by the market on strong refining margins and expectations of strong demand.
But while Saudi Arabia lifted the August price for its flagship crude grade to Asia, Arab Light, by $2.80 per barrel, the price of Brent and WTI crude fell sharply. Saudi Arabia sets the pricing trend for most of the Middle Eastern oil exporters and is typically seen as a bellwether for the state of the oil market.
The price of WTI crude oil slipped $9.01 per barrel by 12:37 pm ET below $100 per barrel to $99.42 (-8.31%), while Brent crude sank $10.41 per barrel to $103.10 (-9.17%).
Also on Tuesday, a Citi report suggested that oil prices could fall to as low as $65 per barrel by the end of this year and as low as $45 by the end of next year if the world enters a recession and demand tanks.
According to Citi, oil demand goes negative "only in the worst global recessions, but oil prices fall in all recessions to roughly the marginal cost."
In the same report, however, Citi said that it did not expect the U.S. economy to fall into a recession.
On the complete opposite end of the spectrum, Russia's former president Dmitry Medvedev suggested that capping the price of Russian oil at half its current level could cause oil prices to skyrocket above $400 per barrel.
JP Morgan warned this weekend that oil could reach $380 per barrel in a worst case scenario if Russia starts cutting crude oil production in retaliation for the sanctions.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group. More