Crude oil prices slumped Monday, weighed by signs of an economic slowdown in China, the world’s second largest consumer, as the mobility restrictions put in place to combat the spread of the Covid-19 virus hit activity.
By 9:25 AM ET (1325 GMT), U.S. crude futures were down 3.1% at $66.11 a barrel, while Brent futures were down 2.7% at $68.66 a barrel.
U.S. Gasoline RBOB Futures were down 2.7% at $2.2005 a gallon.
Chinese industrial production and retail sales growth slowed sharply in July, hit by
flooding and fresh outbreaks of Covid-19 that disrupted business activity. Additionally, the country’s crude oil processing last month fell to lowest level since May last year, the first year-on-year decline since March last year when the coronavirus first hit hard.
“The latest spread of the delta variant will be a worry for jet fuel demand, particularly in China, where we had seen a fairly strong recovery in domestic air travel following the initial Covid-19 outbreak,” said analysts at ING, in a note.
Aside from jet fuel demand, China’s Ningbo-Zhoushan container port, the world’s third-busiest, remained partially closed for a sixth day Monday, raising concerns that the shutdown will disrupt economic activity in the region longer term.
The International Energy Agency last week cut its oil demand growth forecast for the second half of the year by half a million barrels per day, citing new Covid-19 restrictions imposed in several major oil consuming countries, particularly in Asia.
Illustrating the change in tone in the energy markets, after strong gains for most of the year, data on Friday from the Commodity Futures Trading Commission had shown that money managers cut their net long positions in crude futures and options by nearly 10% in the week through Aug. 10.
“This move was driven by longs liquidating, rather than fresh shorts entering the market. Growing uncertainty has led to speculators taking risk off the table,” added ING.
In corporate news, Saudi Aramco (SE:2222) is looking to sell a significant minority stake in its gas pipelines, Reuters reported earlier Monday, looking to raise at least $17 billion.
Additionally, BHP Group (NYSE:BHP) is holding talks over a potential merger of its petroleum business with Woodside (OTC:WOPEY) Petroleum, accelerating the miner’s retreat from fossil fuels
