Crude Oil Lower; Slowing Chinese Growth Weighs

© Reuters.

By Peter Nurse

AiVIF.com -- Crude oil prices weakened Monday, weighed by concerns of slowing growth in China, the second-largest oil consumer in the world, amid rising Covid cases.

By 9:30 AM ET (1330 GMT), U.S. crude futures traded 1.1% lower at $73.11 a barrel, while the Brent contract fell 1% to $74.67.

U.S. Gasoline RBOB Futures were down 0.8% at $2.3165 a gallon.

China's factory activity growth slipped sharply in July, with the Caixin/Markit Manufacturing Purchasing Managers' Index, a business survey, falling to 50.3 last month from 51.3 the month before, the lowest level since April 2020.

China’s economy had largely recovered from the disruptions caused by the first round of the coronavirus pandemic, but fears are growing that the highly-contagious delta variant will pose new problems for the world's second-biggest economy.

While the overall number of infections is much lower than outbreaks elsewhere, there have been new cases registered in 14 of 32 provinces, raising the likelihood of additional strict containment measures.

“Clearly, Covid-19 still poses a risk to the demand recovery, particularly in countries where vaccination rates are still low,” said analysts at ING, in a note.

Additionally, oil output from the Organization of the Petroleum Exporting Countries rose in July by 610 million barrels per day month on month to its highest since April 2020, according to a Reuters survey.

Still, despite this additional output, “the increase was still below the 760M bbls/d they could have increased by (including the return of voluntary cut volumes from Saudi Arabia),” ING added.

Yet, despite these factors, oil prices remain elevated. In India, the third-largest oil importer globally, July’s daily gasoline consumption exceeded pre-Covid-19 levels as states relaxed lockdowns, while the number of people flying in the U.S. hit a new high of 2.23 million over the weekend, according to the Transportation Security Administration.