Crude oil prices slid Monday as fears of another COVID resurgence loomed around the world. With many sectors fearing new shutdowns and slowing demand, oil prices went down to their lowest levels in nearly 3 months.
Crude Oil Prices Fall Down By 4.6%
Last Monday, US crude oil prices fell by as much as 4.6% before rallying. By the end of the day, the prices fell by 2.6% and ended up at $66.48 a barrel. This is near its lowest price since May and 12% below the multi-year high.
However, prices are still comfortably above the $50 levels they started in 2021. The fears of more COVID cases brought about by the Delta variant greatly reversed the rising trend of crude oil prices.
Overseas, investors are greatly concerned about the falling demand for oil in China. Chinese national health officials already announced last week that they are canceling all large-scale exhibitions and events for the duration of August.
In addition, gains in travel and tourism are already sputtering in the world’s largest country. In fact, the country’s economic recovery is already showing signs of losing momentum.
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US Companies Holding Off Plans To Return To The Office
Back in the United States, economic activity is also considering a pause in its plans to return to the office. Many major US companies have held off asking workers to get back to their desks pending completion of their vaccination programs and for the Delta surge to subside.
Donald Morton, senior VP for Herbert J. Sims remarked that “the anxiety continues to grow over demand destruction. We’re seeing a lot of liquidation.”
Even if oil’s current supply and demand dynamics are more stable compared to 2020, there are growing concerns. A return of travel restrictions and policy reversals on COVID-19 responses are now causing crude oil prices to drop lower. “People have good memories from last time around,” Morton noted.
Brent, Copper Prices Also Fall
Meanwhile, Brent crude slid 2.3% to $69.04 a barrel. As a result, energy companies’ shares prices tumbled down as well. Total drops in the past month now total a loss of 7.5%. Reports of rebounding profits over the last few weeks are now a memory.
Another tell-tale sign is the reduced prices of commodities like copper futures. Copper prices retreated 1.3% to $4.29/lb as demand for the metal continues to go down. Other materials such as nickel and aluminum also saw their prices decrease on Monday.
All Eyes On China As It Adopts Zero COVID-19 Tolerance
Meanwhile, China is taking a more hardline stance in dealing with COVID–19. Norbert Rucker, economics head for Julius Baer, said that “While some countries seem to be flipping to learning to live with the coronavirus, [China] is adopting a zero-tolerance policy” with stricter travel rules and quarantine measures. In addition, the dollar’s increasing strength meant commodity prices are much higher for foreign buyers.
If the decline in commodity prices continues for a while, it may ease inflationary pressures back in the United States. However, it takes time for commodity futures to reflect in terms of consumer prices.
For example, gasoline prices now average $3/gallon. Even with lower oil prices and reduced demand, US gasoline prices remain elevated at the $3 level.
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Watch the Yahoo Finance video reporting that oil prices drop as Delta variant concerns rise:
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