Crude Oil Prices Fall to $87 per Barrel

Crude oil prices have fallen on international markets to $87, pressured by concerns over demand in China due to a new wave of COVID-19 infections and deteriorating growth prospects for major economies.

In the London market, the price of a barrel after noon was down 52 cents from the closing price at the end of last week, amounting to $87.10. Last Friday, it closed trading down $2.16.

In the U.S. market, a barrel for December delivery traded today at a price 68 cents lower, at $79.40. On Friday, it closed trading down $1.56.

At the end of last week, sentiment was dampened by weakened demand in China due to a new wave of COVID-19 and the possibility of renewed increases in key interest rates in the U.S.

Concerns for China extended into the beginning of this week.

The number of new COVID-19 cases has remained close to high April levels, reflecting new hotspots in all regions and major cities. Schools in some districts of Beijing switched to online classes on Monday after officials urged residents to stay home.

Guangzhou has imposed a five-day lockdown on its most densely populated district.

– Oil prices are pressured by the prospects of new restrictions, and thus weaker Chinese demand – said Craig Erlam from OANDA.

Traders are also concerned about the slowdown in economic activity in other major economies.

– Risk appetite is weakening as all economic data from major countries recently signal a recessionary scenario, particularly in the United Kingdom and the Eurozone – said Tina Teng from CMC Markets.

Last week’s statements from the U.S. central bank fuel fears for the growth of the world’s largest economy, given signals of further increases in key interest rates.

– We see gloomy economic prospects worldwide, which continuously pressures oil prices, and if interest rates continue to rise, expectations are likely to worsen further – added Teng.

Estimates of interest rate hikes in the U.S. are supported by the dollar, which makes oil more expensive for buyers with other currencies and further dampens demand.

The Organization of the Petroleum Exporting Countries (OPEC) separately announced today that the price of a barrel of its members’ oil basket fell by $2.87 on Friday, to $87.65.