Global oil prices slumped to their lowest prices in nearly five months today as fears over new coronavirus lockdowns mounted.
With numbers of new cases climbing around the world, several countries have put in place new restrictions, putting downward pressure on demand.
Both Brent crude and West Texas Intermediate fell about six per cent earlier, but picked up some of the ground they lost.
By the mid-afternoon, Brent was trading 3.5 per cent down at $37.74, while WTI stood down 3.6 per cent at $36.05.
When the world went into its first lockdown period back in March, oil prices plummeted as demand dried up almost overnight.
The drop ushered in an historic period of uncertainty in which the price of WTI flipped negative for the first time on record.
As economies began to open up over the summer, prices gradually rose to around $40 – two-thirds of where they had started the year.
The increase was helped by oil producer alliance Opec+, which committed to record levels of price cuts in order to keep prices stable.
However, with France and Germany among nations to implement a full lockdown yesterday, concerns of a repeat of March’s seismic shifts are brewing.
Bjornar Tonhaugen, head of oil markets at Rystad Energy, said that the moment the market knew would come eventually had now arrived.
“The new lockdowns have since yesterday caused a carnage in the oil market, which continues this morning after the worst single-day sell-off since 8 September.
“Oil demand will lose ground as a result of the new lockdowns, with road fuels taking a significant hit as transport will be curtailed to minimum again. Prices now naturally decline on this grim prospect”, he said.
Craig Erlam at OANDA said that it was time for Opec to act again to even up prices.
“OPEC+ has signaled a willingness to act, if necessary, and this is a warning by the markets that the time has come”, he said.
“A 2m production increase in January is now surely off the cards, but more may be needed if prices continue to plunge as they have. I expect we’ll hear more from OPEC+ before the December meeting.”