Oil prices fell nearly 2% on Monday, extending last week’s sharp losses on concerns that the rising US dollar and new pandemic restrictions in Asia, particularly China, could hamper the global recovery in fuel demand.
Brent crude futures fell $1.27, or 1.8%, to $69.43 a barrel by 0434 GMT after posting their biggest weekly loss in four months after falling 6% last week.
West Texas Intermediate (WTI) crude futures fell $1.29, or 1.9%, to $66.99 a barrel, after falling nearly 7% in the steepest weekly drop in nine months last week.
Brent, WTI hit two and a half week lows.
Concerns about potential global oil demand erosion have reemerged as the Delta variant infection rate accelerates. New restrictions on China, the world’s second-largest oil consumer, are a major factor making the outlook for demand growth unpredictable.
The deadlocks include flight cancellations, warnings from 46 cities against travel, and restrictions on public transport and taxi services in the 144 worst-hit areas.
China reports rise in new COVID-19 cases. On Monday, China reported 125 new COVID-19 cases, up from 96 a day earlier. In Malaysia and Thailand, infections continue to break more than 20,000 daily records.
Despite the number of cases in China is low, it comes just at the height of the summer travel season, this overshadowes the signs of strong demand elsewhere unfortunately.
China’s July crude oil imports down 20% year on year. Data released on Saturday showed, China’s crude oil imports dipped slightly on a daily basis in July to 9.71 million barrels per day (bpd), a fourth month in a row of imports below 10 million bpd. This indicates a sharply down considering record of 12.94 million bpd in June 2020 when refiners were stocking up on cheap crude.
China’s export growth slowed more than expected in July following the outbreak of COVID-19 cases, along with the import growth was also weaker than expected due to floods. The decline is pointing out a second-half slowdown in the country’s industrial sector.
After the stronger-than-expected US jobs report on Friday, the US dollar’s rise to a four-month high against the euro also put pressure on oil prices.
Stronger US dollar makes oil more expensive for holders of other currencies.
By the way, trade was calm due to holidays in Japan and Singapore.