Fresh lockdown ion some countries – particularly in Europe, because of a new wave of novel coronavirus infections pushed global oil prices to a five-month low on Monday.
With rising rate of infection of Covid-19, many countries including UK, France and Germany, have tightened social restrictions.
The markets are concerned that the global economic growth will be stunted and demand for oil will slump because of the new lockdown measures.
Additionally, the US election looming this week has also made commodities and share markets very edgy,
The price of Brent crude fell to a low of $35.74 per barrel, a level not seen since late May in Asia trading hours. Later there was some recovery in London trading with the price rising to $37.86 by mid-morning.
Compared to the beginning of the year, the price of Brent, the main benchmark for oil prices, is down by 45 per cent.
Global energy companies have been hit hard by the virus-induced slump and thousands of job cuts this year have been announced by companies like BP and Shell.
After a slump in demand, Royal Dutch Shell has said it expects to cut 7,000 to 9,000 jobs while 10,000 jobs are planned to be cut by BP.
There was a 7 per cent drop in the price of US crude oil has as it reached a low of $33.64 a barrel on Monday prior to recovering slightly later.
A gloomy economic outlook has been caused by the absence of continued US fiscal stimulus and concerns over a closely fought presidential election this week in the United States,
“Whichever way you look at it, this coming week will be huge for US and global markets,” said Simon Ballard, chief economist at First Abu Dhabi Bank.
“We see the potential for a sharp rise in volatility around these events and all in the context of a still deteriorating Covid-19 situation across much of the US, Europe and elsewhere.”
China is still the most upbeat market for economic growth this year.
China would raise its quota for 2021 by 20 per cent for non-state owned companies, said the top crude oil importer of the world on Monday.
This announcement was made following the upbeat October factory activity in the Chinese economy which accelerated at the fastest pace in nearly a decade with a syrge in domestic demand.
This was revealed by the Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) which is a private survey that deals with smaller to medium-sized companies.
According to official Chinese figures, there was strong economic growth during the third quarter which helped the country to continue with its recovery from the pandemic hit.
Between July and September, a growth rate of 4.9 per cent compared to the same period a year ago was reported by the second largest economy of the world.
(Adapted from BBC.com)