Here’s Why Oil Prices Are Plummeting Again
Oil prices continued to drop on Monday amid a resurgence of the coronavirus and renewed fears of lockdown measures that have the potential to quash global demand. Here’s what you need to know.
Brent crude, the international benchmark, dropped 0.8% to $37.61 per barrel on Monday morning and is down some 10% over the last week.
WTI, the American benchmark, dropped 1.45% on Monday morning to $35.27 and is down more than 8% over the last week.
The oil market is now seeing lows on par with the losses it weathered in April, during the worst of the twin demand shocks caused by the pandemic and the price war between Saudi Arabia and Russia.
As the virus surges across the United States and Europe, fears that new lockdowns will suppress demand for fuel and travel—just as they did in the spring—are driving prices lower.
Uncertainty over the upcoming U.S. election is also prompting caution among investors across oil and other asset classes as they brace for volatility in the coming week.
On top of those demand concerns, Libya is ramping up production, which will inject more oil into the market and drive down prices even further.
“Oil markets have continued their spiral of decline on Monday morning as Europe prepares for a wider lockdown for November, amplifying fears that demand for oil will decline once again,” Mihir Kapadia, chief executive of Sun Global Investments, said in a note reported by MarketWatch.
$2. More than half of the 140,000 gas stations in the United States are now selling gas for less than $2 per gallon, CNN Business reported over the weekend.
The oil industry saw twin shocks in the spring thanks to an early surge of the coronavirus pandemic, which decimated global demand for fuel, and a tense price war between Russia and Saudi Arabia, in which both countries ramped up production. The effect of both those factors sparked a massive drop in prices. Prices ticked back up as global demand recovered over the summer and stringent lockdowns ended. Saudi Arabia and Russia also agreed to production cuts in an attempt to stabilize the market. That wasn’t enough to undo the damage in the United States, however. Dozens of oil companies have filed for bankruptcy, including Chesapeake Energy. All those small bankruptcies are likely to spur an untick in consolidation across the sector, according to a recent analysis from S&P Global Market Intelligence.
Here’s What Negative Oil Prices Really Mean (Forbes)
What Does Coronavirus Have To Do With Crashing Oil Prices? Russia And Saudi Arabia’s Spat Explained. (Forbes)