Oil prices continued last week’s plunge this morning as increased coronavirus restrictions came into effect around the world.
Prices have fallen sharply over the last week over fears that new lockdowns will cause a decrease in fuel demand.
Worldwide standard Brent crude dropped 2.3 per cent to trade at around $37, while US benchmark West Texas Intermediate shed 2.8 per cent to fall to $34.83.
The falls came as the UK became the latest European country to announce a new lockdown to tackle a surge in coronavirus cases.
From 5 November, it will enter a month-long shutdown in a bid to reduce a climbing rate of infection.
It joins countries like France and Germany, which have already announced similar steps to combat the virus.
In addition, uncertainty over the result of Tuesday’s US Presidential election is also squeezing prices.
Rystad Energy’s senior oil markets analyst Paola Rodriguez-Masiu said: “After a weekend of lockdown announcements and grim projections, oil prices couldn’t do anything else but jump of the cliff to lower levels on Monday.
“It is not just bearish traders sweating over what’s coming, it’s a very logical price move. The pandemic’s second wave was a development largely ignored in market pricing during summer and now the pandemic returned with a bang.
“Oil prices sunk to a five-month low and if we need to name countries responsible for this today, we would make a long list of Covid-19 hit nations.”
The new restrictions come as countries like Libya and Iraq increased production, leading to fears of a surplus of oil.
Oil producer alliance Opec+ will meet at the end of the month to discuss further restrictions.
It is currently cutting output by 7.7m barrels per day but may have to go further if it is to prop up market prices.
The falls will pile more pressure on oil majors, said Interactive Investors’ Richard Hunter.
BP and Shell, which posted small profits last week, have set a breakeven price for oil of $42 for the rest of the year.