For the first time since May 11th, WTI crude futures fell below $100 per barrel as investors begin to come to terms with the likelihood of an economic contraction produced by the tightening of monetary policy by the Fed.

Adding to the perception of oil’s risk was a note by Citigroup Inc., which predicted that oil could collapse to $65 per barrel by the end of the year and drop further to $45 per barrel by the end of 2023, if a recession hit and destroyed demand.

There are however several factors to consider when examining the market. First, the high price of oil is being heavily driven by Russia’s war in Ukraine, and that will not go on forever. As Russia continues to make advances in the east, and Ukraine continues to lose soldiers at a shockingly dramatic rate, the end of the war is inevitably approaching. Once that war ends, Europe will have every incentive to normalize relations with Russia to re-establish access to cheap Russian gas prior to the onset of winter.

Once relations with Russia are normalized, Russian oil will likely reenter the western market as part of the agreement, and that will lower the price of crude dramatically.

A second consideration is the supply of oil is not entirely related now to the high prices of the refined products used in shipping and transportation. There is a refinery bottleneck which is likely keeping oil slightly lower and refined products slightly higher than they might be if the refining capacity were to increase, and more crude could be turned into feedstock and refined into gas and diesel.

The final consideration is the reopening of China, which is happening, and will increase demand. That will work to stabilize prices if they begin to drop.