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Oil prices in the US have fallen to their lowest level since December 2021 on concerns that protests in China over Covid-19 lockdowns will affect demand.
West Texas Intermediate crude futures, the US benchmark, fell 2.7% on Monday to nearly $74 a barrel, a level last reached in December 2021. Brent crude oil futures, the global benchmark , fell 2.9% to nearly $81 a barrel. walk. That is the lowest level since January.
Global oil prices are down about 35% since June as strict coronavirus restrictions in China have kept demand weak and as some of the world’s largest economies have indicated they are headed for recession.
That has helped drive down gas prices for American drivers.
The national average cost of a gallon of gas is now $3.55, down 0.3% from a day ago and 5.7% from last month, according to the AAA. According to the Energy Information Administration, crude oil prices are the biggest driver of gasoline prices in the US.
Thousands of protesters took to the streets across China over the weekend in a rare series of demonstrations against the country’s zero-Covid strategy.
One of the reasons for the protest was a deadly fire in an apartment in the Xinjiang region. Videos of the incident appeared to show that lockdown measures had slowed firefighters to reach the victims.
Global oil prices have fallen despite the OPEC+ group of major oil producers cutting production by 2 million barrels per day from this month, the biggest cut since the start of the pandemic. OPEC+ meets again on Sunday.
Falling fuel prices are a relief for millions of households and businesses around the world struggling to pay skyrocketing energy bills since Russia invaded Ukraine in late February.
But markets remain jittery as the West tries to negotiate a price cap on Russian oil. Large developed economies are quarrel over the level of the cap, which is intended to limit Moscow’s revenues without seriously disrupting global oil supplies.
Media reports last week indicated that Russian oil could be capped at $65 to $70 a barrel, close to the current market price. Still, that level would cause Russia minimal pain.
But if Western powers decide to drive the price lower could fuel the global energy crisis, especially if Russia retaliates. Moscow could decide to cut production more than expected, driving up prices and fueling global inflation.
“It looks increasingly likely that this will happen at a level that doesn’t really hamper Russia’s ability to sell crude oil – contributing to the drop in oil prices – or put its buyers in an uncomfortable position,” he said. Craig Erlam, senior market analyst at Oanda, wrote in a Monday note.
The price cap will come into effect on December 5, the same day the European Union embargo on Russian crude oil imports by sea takes effect.
Deutsche Bank analysts said on Monday they expected the EU embargo to create “moderate supply risk” between January and March next year, though the impact would likely be “mitigated by Russia’s self-interest in maximizing export earnings”.
— Julia Horowitz and Jessie Yeung contributed reporting.
