Oil prices dropped by more than 2 percent early on Monday, as weak data about China’s economy and ultra-low U.S. consumer confidence weighed on the immediate global oil demand outlook.
As of 9:06 a.m. EDT, WTI Crude was down 2.54% at $66.65, and Brent Crude traded down 2.28% at $68.94, as the market continues to fear that the COVID resurgence will hit fuel demand and slow down economic growth in the world’s top oil importer, China.
Today, economic data out of China for July was bearish for the oil market and prices. The country’s industrial production rose by 6.4 percent annually in July, but that was below analyst expectations. So was the reading for the retail sales, as China felt last month the impact of flooding due to a typhoon in several areas and the start of a new COVID-19 wave. Authorities are cracking down on the virus spreading with lockdowns and suspension of public transportation services and flights, which has already started to dent fuel demand in recent days.
China also reported the lowest refinery throughput in July since May 2020, as independent refiners cut on fuel production amid lower second-half import quotas and weakening profit margins.
The Chinese refinery throughput last month saw its first annual decline since March 2020, when COVID-19 hit demand.
The Chinese data from Monday adds to the bearish U.S. consumer sentiment report from Friday when the University of Michigan said that “Consumers reported a stunning loss of confidence in the first half of August.”
The preliminary consumer sentiment index is at its lowest since 2011.
“Consumers have correctly reasoned 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,” said Surveys of Consumers chief economist, Richard Curtin.
The weak Chinese and U.S. data “support IEA’s latest downgrade to demand for the months ahead as a resurgent delta coronavirus variant is impacting demand across the world,” Ole Hansen, Head of Commodity Strategy at Saxo Bank, said on Monday.