Oil prices slump as new Covid lockdowns threaten global energy demand

Global crude prices continued their slide on Monday, after Brent blend had its steepest decline last week since April. Concerns are growing that new lockdowns could hit the global demand for fuel.

Brent dropped as much as 4.6 percent, to $35.74 a barrel, hitting its lowest level since May, as economists downgraded their European growth forecasts due to the introduction of new restrictions throughout the eurozone. The international benchmark is currently down 45 percent from the start of the year.

US West Texas Intermediate tumbled almost seven percent to $33.64, before paring back losses to hit $34.86 a barrel. More economies across Europe have tightened social restrictions, including the United Kingdom, France, and Germany to battle rising infection rates, and that added to trader concerns about the extent to which the lockdowns will weigh on demand. 

OPEC had earlier projected global oil demand to fall by 10 percent this year to average 90 million barrels per day (bpd). However, the oil cartel expected that demand would recover to almost 95 million bpd over the northern hemisphere winter. 

“The pressure that we are seeing on oil will be a real concern for OPEC+, particularly with Brent now well below $40 a barrel,” said Warren Patterson, head of commodities strategy at ING, quoted by the Financial Times. “Another key uncertainty for the market is the US presidential election … and the consequences this could have on oil,” he added.

Rystad Energy estimates that France and Germany, which usually together consume about four million bpd, could cut their joint consumption by an additional 1.7 million bpd next month.

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