By Adedapo Adesanya
Crude prices on Monday went bearish as official data showed that economic activity slowed in China, indicating that COVID-19 outbreaks are crimping the world’s second-largest economy.
This development dragged the price of the Brent crude oil futures down by 96 cents or 1.35 per cent to $69.63 per barrel and weakened the United States West Texas Intermediate (WTI) crude oil futures by $1.05 or 1.53 per cent to $67.39 per barrel.
Official data from China on retail sales, industrial production and urban investment is expected to show that a recent tightening of coronavirus restrictions prompted declines in activity in the world’s second-biggest economy in July.
Chinese factory output and retail sales growth slowed sharply in July, missing expectations, as flooding and fresh outbreaks of COVID-19 disrupted business activity.
This is further compounded by the Chinese government-imposed restrictions on mobility to counter the spread of the Delta variant raising worries about a recovery in fuel demand.
Authorities have suspended public transportation services and flights, which has already started to dent fuel demand in recent days.
Further worsening the case, crude oil processing in China, the world’s biggest oil importer, last month also fell to its lowest level on a daily basis since May 2020 as independent refiners cut production in the face of tighter quotas, elevated inventories and falling profits.
In Japan, the world’s fourth-biggest importer of crude oil, many analysts expect modest economic growth in the current quarter as a state of renewed emergency restrictions to deal with record cases of infections weigh on household spending.
In the US, doubts about the speed of economic recovery were also heightened after consumer sentiment dropped sharply in early August to its lowest in a decade, according to a survey.
Analysts noted that the economy’s performance will be diminished over the next several months, but the extraordinary surge in negative economic assessments also reflects an emotional response, mainly from dashed hopes that the pandemic would soon end.
The outlook market in the past few days has been largely negative with the International Energy Agency (IEA) last week pointing out that rising demand for crude oil reversed course in July.
The Paris-based agency noted that it was expected to increase at a slower rate over the rest of 2021 because of surging COVID-19 infections from the Delta variant.
