Oil prices dropped on Tuesday, falling below $100 a barrel, as China, the world’s largest oil importer, imposed new lockdowns to combat an outbreak of the coronavirus, moves that could threaten demand.
The swing in oil prices, which approached $130 a barrel last week, reverberated through the stock market: Airlines stocks rallied, and shares of oil producers slid.
Brent crude, the global benchmark, dropped 7.4% to $99.91 a barrel, its lowest price since late February. West Texas Intermediate crude, the U.S. benchmark, fell 6.4% at $96.44 a barrel.
Over the past week, crude prices have plunged more than 20%, reversing much of the surge after Russia’s invasion of Ukraine added turmoil to an already tight energy market. Tens of millions of residents in Chinese provinces and cities including Beijing, Shanghai and Shenzhen are under lockdown amid an outbreak of the omicron variant of the coronavirus. Travel has been cut off between cities, production lines have stopped and malls have been closed.
The measures could snarl global supply chains that are still struggling to recover from pandemic disruptions, by slowing down key factory and transportation networks. Companies in China, including Foxconn, the Taiwanese electronics firm that assembles Apple’s iPhones, have suspended operations in the country.
The new measures have hammered the Hang Seng Index in Hong Kong, where many Chinese companies are listed. With a drop of 5.7% on Tuesday, the index was down 10% so far this week and was at its lowest level since February 2016.
On Wall Street, falling energy costs helped lift share prices Tuesday. The S&P 500 rose 2.1%, with gains led by airlines. American Airlines and United Airlines gained more than 9% on Tuesday, while JetBlue rose more than 7%. A data analysis released Tuesday found that ticket sales for domestic flights in February exceeded those for the same month in 2019, a first since the pandemic began. The trend was expected to continue in March, according to early data from Adobe.
Oil producers tumbled. Chevron and Exxon Mobil both fell more than 5%, and Valero Energy was down 6.8%, making them among the worst performers in the S&P 500.
Gas prices, which have been rising for weeks amid the conflict in Ukraine, also fell slightly Tuesday. The average price of a gallon of regular gasoline stood at $4.316, down from a high of $4.325 the day before, according to data from AAA.
Wall Street has been battered this year as threats to the global economy have mounted. Inflation is climbing at its fastest pace in 40 years, threatening consumer sentiment, and the sudden rise in oil prices in recent weeks has exacerbated the situation. Tuesday’s rally followed three days of losses that had left the S&P 500 down more than 12% for the year.
Federal Reserve officials began a two-day meeting Tuesday and are expected to announce Wednesday that they will raise interest rates by a quarter of a percentage point, as they begin a campaign to cool down the economy.
Investors have also been weighing mixed messages about the conflict between Ukraine and Russia as a fourth round of negotiations between the countries’ officials resumed Tuesday. Mykhailo Podolyak, a Ukrainian representative, said Russia and Ukraine discussed a possible cease-fire and the withdrawal of troops from Ukrainian territory.
“There is so much information investors are taking on board,” said Fiona Cincotta, senior financial markets analyst at Forex.com. Cincotta said investors might be weighing domestic concerns against news from overseas and deeming the United States a safer place to invest right now.
“With COVID spreading in Asia and the geopolitical tensions in Europe, America seems like the best of a bad bunch right now,” she said.
This article originally appeared in The New York Times.
