As the world’s second-largest oil consumer, China’s new restrictions have dampened demand prospects.
Oil prices fell 2% on Monday, continuing last week’s sharp decline in the impact of the appreciation of the U.S. dollar and new pandemic containment measures in Asia, especially China, which may hinder the recovery of global fuel demand.
At 01:25 GMT, Brent crude oil futures fell 1.41 US dollars, or 2%, to 69.29 US dollars per barrel. Last week, they fell 6%, the biggest weekly decline in four months.
US West Texas Intermediate (WTI) crude oil futures fell 1.32 US dollars, or 1.9%, to 66.96 US dollars per barrel, down nearly 7% last week, the largest weekly decline in nine months.
Royal Bank of Canada analyst Gordon Ramsey said in a report: “As the delta mutation infection rate accelerates, concerns about the potential erosion of global oil demand have resurfaced.”
ANZ Bank analysts pointed out that the new restrictions in China, the world’s second-largest oil consumer, are an important factor affecting the prospects for demand growth.
These restrictions include canceling flights, issuing travel warnings in 46 cities, and restricting public transportation and taxi services in the 144 worst-hit areas.
China’s daily crude oil imports in July fell slightly to 9.71 million barrels per day, and its imports for the fourth consecutive month were below 10 million barrels per day, a sharp drop from the record 12.94 million barrels per day when the refinery stocked up in June 2020 Data released on Saturday showed that crude oil prices have risen.
After the outbreak of COVID-19 cases and floods, China’s export growth in July slowed more than expected, while import growth was also lower than expected, indicating a slowdown in the country’s industrial sector in the second half of the year.
On Monday, China reported 125 new COVID-19 cases, up from 96 a day ago.
“Although the number of cases [in China] Low, coincides with the peak summer tourist season,” ANZ Commodity Analyst said in a report. “This obscures signs of strong demand elsewhere. “
In Malaysia and Thailand, the number of infections continues to reach a record of more than 20,000 daily.
After Friday’s stronger-than-expected US employment report stimulated people to bet that the Fed might tighten US monetary policy sooner, the dollar rose to a four-month high against the euro and oil prices fell.
A stronger dollar makes oil more expensive for holders of other currencies.
Japan and Singapore’s holiday trading was quiet.
With the rapidly spreading delta variant sweeping the world, oil has encountered severe headwinds this month, causing some regions to re-limit operations, while the Organization of Petroleum Exporting Countries and its allies (OPEC+) have increased production. The International Energy Agency will provide the latest snapshot of the market on Thursday.
OPEC+ will increase its monthly supply by 400,000 barrels per day from August and continue until its pandemic-related production cuts are fully reversed. Although the latest COVID-19 outbreak has clouded the outlook, as demand accelerates, the market will be able to absorb additional oil.