U.S. crude prices on Monday extended a run of declines that have erased all gains since the Russian invasion of Ukraine and highlighted concerns about the impact of slowing global growth spreading across commodity markets.
West Texas Intermediate crude futures fell $2.68 per barrel, or 2.9%, to $89.41 on Monday, off nearly 30% from their highs of about $124 in March when worries about supply disruptions and shortfalls sent prices to multiyear peaks. Now, the prospect of economic slowdown hurting demand is weighing on prices, even as some traders expect major producers to increase supply.
"It’s a double whammy hitting the market," said Ole Hansen, head of commodity strategy at Saxo Bank. "The demand side is showing weakness, while supply could potentially step up."
Slowing economic growth in China, as reflected in data released Monday, is prompting concerns about weakening demand from a country that consumes about 15% of the world's oil and imports more crude than any other. Many also worry that slowing U.S. growth will hurt demand from motorists and manufacturers. U.S. oil prices remain up about 19% this year.
Average daily U.S. crude output reached 12.2 million barrels during the first week of August, the highest production since April 2020, when the economy was locked down and producers were shutting in wells, according to the Energy Information Administration.
Meanwhile, Saudi Arabia's Aramco said over the weekend that it was on track to expand output by 1 million barrels a day by 2027 to bring its total crude-oil production to 13 million barrels a day.
"The largest exporter in the world is going to increase production and the largest customer —their economic numbers were worse across the board," says Robert Yawger, executive director for energy futures at Mizuho Securities USA. "You barely could have picked a worse scenario."
A revived Iran nuclear deal could also lead to more Iranian oil hitting global markets: about 1 million barrels per day, according to Saxo Bank.
Energy shares, which have been the top-performing stocks this year, were also hit Monday. Halliburton Co. slid 3.7%, Valero Energy Corp. lost 2.8% and Exxon Mobil Corp. fell 1.8%.
Lower oil prices have been good news for consumers at the pump. The national average for a gallon of regular gasoline has fallen steadily in recent weeks to $3.956 from a record of above $5 from June, according to AAA. Higher prices this year had spurred some drivers to cut back, helping control a surge in pump prices.
Cheaper fuel could spur fresh demand, however, one of several factors analysts said could keep prices elevated relative to their prepandemic levels. Others include a potential drilling slowdown in the U.S. and ongoing supply chain disruptions.
—Hardika Singh contributed to this article
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