Oil wells are seen at an oil facility in California.ANADOLU AGENCY VIA GETTY IMAGES
Forbes - November 28, 2022

Oil prices fell Monday to their lowest level in 11 months as further uncertainty in China roiled global markets, giving way to a silver lining for Americans’ wallets as U.S. gasoline looks poised to further fall from its record high in an otherwise worrisome sign for the global economy.

KEY FACTS

  • International benchmark Brent Crude fell 1.8% to $82 Monday, its lowest level since January 6.
  • That’s a 41% decline from its March peak of $139 per barrel as Russia’s invasion of Ukraine sent oil and other commodity prices skyrocketing.
  • The latest dip follows renewed concerns about demand for oil from the world’s largest oil importer China as the country continues to pursue a strict zero-Covid policy, with Brent already down nearly 15% in November as the Chinese government largely stands firm on its stringent pandemic policies even as rare protests against the measures pop up across the country.
  • The latest demand worries also bled into American markets, with U.S. benchmark West Texas Intermediate down 1.6% to $75 on Monday, while stock futures also slumped, with the Dow Jones Industrial Average and the S&P 500 each down about 0.5% early Monday.

CRUCIAL QUOTE

Oil prices are “crumbling under the pressure of record Covid cases and huge economic uncertainty,” OANDA analyst Craig Erlam wrote Monday. “[China’s] commitment to zero-Covid has seriously damaged growth in the world's second-largest economy and by extension, crude demand.”

WHAT TO WATCH FOR

How the latest plunge affects U.S. prices at the pump. The average price for a gallon of gas was $3.55 Monday, according to AAA, down 6% from a month ago and 29% from June’s all-time high of $5.02 per gallon. Patrick De Haan, GasBuddy’s head of petroleum analysis, projects the national average could fall below $3 by Christmas in a “fast case” scenario. Soaring gas prices were one of the primary drivers of the worst inflation in the U.S. since the early 1980s.

TANGENT

Apple shares fell 1.4% Monday amid concerns about the fallout of protests at its largest Chinese iPhone manufacturer Foxconn. The political unrest in China will cause a reduction in iPhone sales of “at least 5%” and up to 5% this quarter, Wedbush analysts Dan Ives and John Katsingris wrote in a Monday note.