Oil prices have been quite tumultuous during the Covid-19 pandemic, with demand hitting record lows across the globe. However, recent attempts at recovery have helped prices climb back to more stable levels. Now, rising cases of Covid-19 and a new set of lockdowns in Europe has ended oil’s three-day win-streak and raises new concerns over another drop in prices.
On Thursday, Brent crude fell by 0.9%, or 38 cents, to $40.50 a barrel, while U.S. West Texas Intermediate also fell by 0.9%, or 36 cents, to $38.79 a barrel. This came after both had jumped by 4% on Wednesday.
The drop came shortly after the European Union’s executive commission lowered its economic forecast, which stated that the Union’s economy would not rebound to pre-virus levels until 2023. This comes after a rise in Covid-19 cases across the continent, which has led to many nations reinstituting stricter lockdown measures. These new lockdowns are expected to reduce demand for oil by 1.5 million barrels a day.
Boris Johnson, the Prime Minister of the United Kingdom, announced in late October that the country would be going under a month-long lockdown for November. The Bank of England anticipates that Britain’s economy will shrink by 11% in 2020, and the new lockdown and eventual Brexit could cause further damage.
Cases in the United States also continue to rise, as the nation surpassed a new record of 100,000 new infections in a day last week. Current uncertainty involving the 2020 election also helped to depress oil prices. Previously, prices surged on Wednesday due to expectations that OPEC and its allies in OPEC+ would hold off on bringing back up to 2 million bpd of supply in January. Earlier in the year, disagreements between OPEC and OPEC+ member Russia led to a runoff in production, which further helped to devalue oil, which for a time went into a negative price range.