Oil prices fell to a ten-month low on Monday morning after stark warnings from Chinese officials shed light on the country’s increasingly worrying Covid outbreak – highlighting the uncertainty shrouding the global economy, but also fueling hopes that gas prices for the first to drop below $3 a gallon over 18 months.
The price of West Texas Intermediate fell more than 5% Monday to below $75.50 a barrel — its lowest level since early January — while international Brent crude also fell 5% to about $82.50 a barrel.
In a morning note, Oanda analyst Ed Moya attributed the decline to a worsening Covid outbreak in China, where a deputy director of the Beijing Center for Disease Control and Prevention warned Monday that the city was facing the “most complex and severe prevention and control situation”. of the pandemic, after China reported its first Covid deaths since May last weekend.
“It looks like the zero-Covid policy isn’t going away any time soon — and that will certainly weigh on global growth,” says Moya, adding that oil prices are likely to continue falling or at least remain at a lower level. amid the “worsening” demand outlook. for oil from China and the US, where prospects of a rail strike could be “deeply troubling for the weakening US economy”.
Following the drop, Patrick De Haan, chief of petroleum analysis at GasBuddy, said that if oil markets remain at current levels, prices at the pump should fall “almost coast to coast in the busy Thanksgiving holiday” — possibly even the national average. to less than $3 around Christmas.
With oil prices down more than 18% this month, the nation’s average gas price has fallen at the same time, falling nearly 12 cents from a week ago to $3.64 a gallon, GasBuddy reported Monday.
“What an incredible turnaround,” says De Haan. “Everyone will see relief at the pump this week, with more substantial declines to come.”
Rising energy prices pushed US inflation to its highest level in 40 years, but global recession fears have since helped push oil prices down from 14-year highs. The price of Brent crude oil is down more than 30% since the high of about $130 a barrel in March. Saudi Arabia and other major oil-producing countries, fueling Monday’s decline, are said to be discussing a deal to boost oil production.
Gas prices have not fallen below a national average of $3 per gallon since May 2021. When oil prices soared earlier this year, the price at the pump hit an all-time high of more than $5 a gallon in June.
Gas prices in the US fall for 10 straight days – nearly $3 in the Southeast (UKTN)