Dan Yergin explains why oil prices are falling despite tight supply, Russia tensions

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• Energy expert Dan Yergin said there are two reasons why oil prices have dropped in the past month despite a market that is still tight: the Fed and Russia’s war in Ukraine.
  
• Yergin said the demand outlook for China, the world’s largest oil consumer, is also uncertain.
  
• “We think OPEC+ will then move to a more liberal approach and allow the few members with spare capacity to produce more,” Edward Gardner, commodities economist at Capital Economics, said
  

Energy expert Dan Yergin said there are two reasons why oil prices have dropped in the past month despite a market that is still tight: the Fed and Russia’s war in Ukraine.

Oil prices had been increasing since last year, spiking to highs after Russia launched an unprovoked war on Ukraine. But since the end of May, Brent has fallen from over $120 per barrel to last trade at around $109, or around 10% lower. West Texas Intermediate futures have tumbled more than 9% in the same period.

Yergin, vice chairman of S&P Global, said the U.S. Federal Reserve is choosing to go after inflation even at the risk of tilting the economy into a recession, and that’s “what’s easing its way into the oil price.”

On Wednesday, Federal Reserve Chairman Jerome Powell told lawmakers the central bank is determined to bring down inflation, even though he acknowledged a recession could happen. Achieving a “soft landing,” in which policy tightens without severe economic circumstances such as a recession, will be difficult, he said.


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