Oil prices have had a rather shaky year so far. The combination of the Covid-19 pandemic and the past trade disputes between OPEC and Russia caused prices to drop to decade lows, before slowly beginning to recover. Now, prices have seen another drop as concerns over demand flare up once more.
On Tuesday, West Texas Intermediate crude slipped by 7.06%, or $3.01, to eventually settle at $36.76 per barrel. However, shares went as low as $36.13, a price point which was last seen on June 15th. Brent crude fell by 5.3% to $39.78, which was also a price not seen since June.
Paola Rodriguez-Masiu, a senior oil markets analyst at Rystad Energy, said that the dip is due to “a stalling crude demand outlook for the rest of the year, with rising cases of Covid-19 and the end of the summer driving season in the U.S., as well as Asian refineries putting on [the] breaks.” The moves indicate that the market “seriously worries about the future of oil demand.”
After their fall earlier in the year, prices for West Texas Intermediate jumped 90% in May and have been steadily rising since. Much of this came as OPEC and Russia reached a new agreement to limit oil production. However, factors like Saudi Aramco cutting their oil prices for October, rising tensions between the U.S. and China, increasing production coming back online, and a strong U.S. dollar all contributed to the price falls.
In a recent note to investors, Bank of America stated that they believe it will take at least three years for demand to recover from Covid, assuming that a cure or vaccine is developed. As electric cars continue to increase in popularity, with more manufacturers getting into the market, Bank of American also noted that peak oil prices may come as soon as 2030.