A customer replaces a fuel nozzle at a Chevron Corp gas station on Wednesday, July 7, 2021. in San Francisco, California, USA.
David Paul Morris | Bloomberg | Getty Images
Oil prices fell to a six-week low on Friday as new Covid lockdowns sparked demand concerns just as industry players signaled a return in supply.
But for consumers looking for a respite at the pump, the declines are unlikely to translate into lower gas prices immediately. The national average for a gallon of gas was a seven-year high of $ 3.41 on Friday, according to the AAA. That’s up from $ 3.34 a month ago to $ 2.12 last year.
The US benchmark for oil declined more than 4% to a session low of $ 75.37, a price not seen since October 7th.
Crude oil was trading in the green earlier in the day but fell into negative territory following news of Austria’s lockdown. The rebound in demand has been a major driver of oil recovery this year and any signs that it may thaw will startle market participants.
“The market is basically still in a good position, but lockdowns are now an obvious risk if other countries follow Austria’s lead,” said Craig Erlam, senior market analyst at Oanda. “Moving below $ 80 could intensify the correction and perhaps pull the price back towards the middle of the $ 70 region,” he added.
The December futures contract expires today, with the more actively traded contract for January delivery falling 3.8% to $ 75.44 a barrel. Brent Crude Oil Futures, the international benchmark, traded at $ 78.15 for the first time since October 1.
Both WTI and Brent are on track for a fourth straight week of losses, the longest weekly losing streak since March 2020.
“A slight decline in gas demand, possibly due to seasonal changes in driving habits, will contribute to some price relief at the pump,” an AAA spokesman said on Monday, adding that “the persistently tight crude oil supply is likely to lead to fluctuations in gas prices.” . instead of falling for some time. “
While oil’s decline on Friday is the largest since July, the commodity has trended lower in recent weeks. The Biden government has repeatedly stated that it is looking for ways to reduce consumer burden from higher oil in the form of gas prices, which are hovering around a seven-year high. One possibility would be for the government to develop the Strategic Oil Reserve.
“If the US presidential administration wants the oil market’s attention, it has it now that all eyes are on Washington to see if it will step up its stance on China’s SPR release with a subsequent coordinated effort to put further pressure on wield oil prices. ” , “said Louise Dickson, Senior Oil Market Analyst at Rystad Energy.” The US has been publicly investigating the oil market since the summer, particularly OPEC +, to facilitate supply and obtain price relief, as well as other importing countries such as China, India and Japan. ” [are] join the choir. “
However, analysts have determined that releasing oil from the SPR is unlikely to have much long-term effects.
“While such a decision would lead to price setbacks, the SPR can only close the gap during temporary production stoppages and not fix structural problems such as underinvestment and rising demand,” UBS said in a November 5 announcement to clients.
In addition to political headwinds, oil is also being put under pressure by increasing supply, as producers, including in the USA, are putting production online.
Oil prices rose steadily throughout 2021, with WTI hitting a seven-year high of $ 85.41 on October 25. Since then, it’s down 11.5%. Despite the recent weakness, US oil is still 55% up for 2021.