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Oil prices drop amid faltering demand outlook in China

Oil prices drop amid faltering demand outlook in China

Crude oil storage tanks are seen in an aerial photograph at the Cushing oil hub in Cushing, Oklahoma, on Apr 21, 2020. (File photo: Reuters/Drone Base)

TOKYO :Oil prices fell more than 1 per cent on Monday (Aug 16), dropping for a third session, after official data showed that refining throughput and economic activity slowed in China in an indicator that fresh COVID-19 outbreaks are crimping the world's No 2 economy.

Brent crude was down US$0.90, or 1.3 per cent, at US$69.69 a barrel by 6.49am GMT (2.48pm, Singapore time). United States oil fell by US$0.97 cents, or 1.4 per cent, to US$67.47 a barrel.

Factory output and retail sales growth slowed sharply in July in China, data showed, missing expectations as fresh outbreaks of COVID-19 and flooding disrupted business activity.

"Oil futures weakness ... is likely triggered by weaker-than-expected growth data from China, which is a major consumer of oil," said Kelvin Wong, market analyst at CMC Markets in Singapore. "All in all, the global peak growth narrative has been intensified."

China's crude oil processing last month also fell to the lowest on a daily basis since May 2020, as independent refiners cut production amid tighter quotas, elevated inventories and falling profits. China is the world's biggest oil importer.

In Japan, the world's fourth-biggest importer of crude oil, many analysts expect modest economic growth in the current quarter as renewed emergency restrictions to deal with record cases of COVID-19 infections weigh on household spending.

"We expect (Japan's GDP) growth to remain under pressure in the third quarter as spending and production continue to struggle amidst disruptions from the pandemic," Moody's said.

The International Energy Agency said last Thursday that 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 highly transmissible Delta strain.

Money managers reduced their net-long US crude futures and options holdings in the week to Aug 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.

Source: Reuters/kg

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