Oil prices drop amid faltering demand outlook in China
Oil prices fell by about 1% on Monday, dropping for a third session, after official data showed that refining throughput and economic activity slowed in China in an indication that Covid-19 outbreaks are crimping the world’s second-largest economy.
Brent crude was down 58c, or 0.8%, at $70.01 (about R1,031) a barrel by 09.43 GMT. US oil fell by 64c, or 0.9%, to $67.80 (about R998). Both contracts dropped by more than $1 (about R14.73) earlier in the session.
Chinese factory output and retail sales growth slowed sharply in July, data showed, missing expectations as flooding and fresh outbreaks of Covid-19 infections disrupted business activity.
China’s crude oil processing last month also fell to the lowest level on a daily basis since May 2020 as independent refiners cut production in the face of tighter quotas, elevated inventories and falling profits. China is the world’s biggest oil importer.
“(Concerns) about the spread of the Delta variant in China and the effects this will have on oil demand are continuing to weigh on prices,” Commerzbank said in a note.
Doubts about the speed of economic recovery were also heightened after US consumer sentiment dropped sharply in early August to its lowest in a decade, a University of Michigan survey showed late last week.
The International Energy Agency (IEA) last week said rising demand for crude oil reversed course in July and was expected to increase at a slower rate over the rest of 2021 because of surging Covid-19 infections from the Delta variant.
Money managers reduced their net-long US crude futures and options holdings in the week to August 10, the US Commodity Futures Trading Commission (CFTC) said on Friday.
Speculators also cut their futures and options positions in New York and London by 21,777 contracts to 283,601 over the period, the CFTC said.