Crude prices spiked this year after Russia invaded Ukraine but may fall sharply in an economic slowdown.
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Oil prices have tumbled below $100 a barrel as recession fears hit the market. They could fall to $65 if a recession actually strikes, according to Citigroup.
Oil is having a bad day. brent crude, the global benchmark, has slumped 9.8% to $102.40, while WTI, the U.S. benchmark, has dropped 8.5% to $99.20, breaking below $100.
That’s bad enough. But if a recession does materialize, the drop could get even worse. During the 2007-2008 financial crisis, oil prices peaked at more than $160 a barrel and then quickly fell below $40 a barrel. Eventually, prices settled at around $90 a barrel and remained there for four years. Citi’s analysts see oil falling to $65, and could fall further to $45 a barrel by the end of 2023 if oil-exporting countries don’t intervene to reduce supply.
Citi’s economists aren’t currently forecasting a U.S. recession this year, but are also wary of the Federal Reserve’s ability to engineer a modest slowdown with aggressive interest-rate increases.
Global oil prices have gained more than 40% this year after Russia invaded Ukraine in February, threatening supply from one of the world’s biggest producers. However, prices declined last month for the first time since November.
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