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Oil futures dropped below $100 a barrel for the first time since May as concerns grow that a global economic slowdown will ultimately hobble demand. 

West Texas Intermediate crude futures dropped as much as 9.3% to near $98 a barrel. Oil was pressured in a low liquidity session on Tuesday as equities fell and the dollar surged, making commodities priced in the currency less attractive. Citigroup Inc. said that crude could fall to $65 this year in the event of a recession, a call in stark contrast to JPMorgan Chase & Co.’s most bullish $380 a barrel scenario.

“Crude oil prices have slumped as weakening demand concerns are starting to outweigh fears about tight supply," said Fawad Razaqzada, market analyst at City Index. “A growing number of analysts are expecting that many of the world’s leading economies will suffer negative growth in the next few months, and this will drag the US into a recession."

Adding to recessionary fears, Shanghai launched mass testing for Covid in nine districts after detecting cases the past two days, calling into question the demand recovery in one of the world’s biggest oil-consuming countries. The additional testing brings concerns that more lock downs could be implemented as the city reported several infections Sunday and Monday. 

Oil futures prices have cooled in the past month amid escalating fears over an economic slowdown as central banks aggressively raise interest rates. Still, physical barrels are fetching enormous premiums. The kingdom hiked its official selling prices to Asia on Tuesday. Its flagship Arab Light crude price will be $9.30 above its regional benchmark in August, an increase of $2.80. 

While futures have been pressured by the threat of a global economic slowdown, key market timespreads remain robust, indicating that there’s solid demand for near-term supplies. A strike in Norway and supply disruption in Libya have exacerbated that strength of late. 

In welcome news for Biden, retail gasoline prices in the US have eased from a record above $5 a gallon in mid-June. Pump prices were near $4.80 on Sunday, according to figures from auto club AAA, after slipping for 21 consecutive days in the longest losing run in more than two years.

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