Oil prices plummeted to 10-month lows Monday morning after stark warnings from Chinese officials shed light on the nation’s increasingly worrisome Covid outbreak—highlighting the uncertainty shrouding the global economy but also fueling hopes that gas prices may fall below $3 a gallon for the first time in 18 months.
The price of West Texas Intermediate slipped more than 5% Monday to less than $75.50 per barrel—its lowest level since early January—while international benchmark Brent crude also tumbled 5% to roughly $82.50 per barrel.
In a morning note, Oanda analyst Ed Moya attributed the decline to a worsening Covid outbreak in China, where a deputy director of the Beijing Center for Disease Control and Prevention on Monday warned the city was facing its “most complex and severe prevention and control situation” of the pandemic, after China over the weekend reported its first Covid deaths since May.
“It seems the zero-Covid policy is not going away anytime soon—and that will definitely weigh on global growth,” Moya says, adding oil prices will likely keep plunging or at least stay at lower levels amid the “deteriorating” demand outlook for oil from China and the U.S., where prospects of a railroad strike “could end up being very troubling for the weakening U.S. economy.”
Following the decline, Patrick De Haan, head of petroleum analysis at GasBuddy, said if oil markets hold at current levels, prices at the pump should fall “nearly coast-to-coast into the heavily traveled Thanksgiving holiday”—potentially even pushing the national average to less than $3 by around Christmas.
With oil prices tumbling more than 18% this month, the nation’s average gas price has fallen in tandem, shedding nearly 12 cents from a week ago to $3.64 per gallon, GasBuddy reported Monday.
“What an incredible turnaround,” says De Haan. “Everyone will be seeing relief at the pump this week, with even more substantial declines on the way.”
Surging energy prices pushed U.S. inflation to its highest level in 40 years, but global recession fears have since helped oil prices fall from 14-year highs. The price of Brent crude has fallen more than 30% since its high of about $130 per barrel in March. Further fueling Monday’s decline, Saudi Arabia and other key oil-producing nations are reportedly discussing a deal to boost oil production.
Gas prices haven’t fallen below a nationwide average of $3 per gallon since May 2021. As oil prices soared earlier this year, the price at the pump hit a record high above $5 per gallon in June.