Oil fell to its lowest level in two weeks as a fast-spreading delta variation threatened Demand and economic data from China indicated a downturn. On Monday, futures in New York fell by 3.6 percent. The virus is clouding the picture for consumption, with a new epidemic in China and a record number of cases in Sydney. In the midst of the uptick in instances, barrels from some of OPEC’s most important producers are flooding the market, prompting alarm.
In the meantime, data show that China’s economic activity slowed in July. According to Rebecca Babin, senior energy trader at CIBC Private Wealth in the United States, China’s government has taken initiatives to reduce commodities inflation, and these are having an impact. The next wave of Chinese data on oil import figures will be crucial in determining how China is responding to the recent increase in illnesses.
After a tiny uptick in July, crude prices are off to a shaky start in August, with the revival of Covid-19 countering the global Demand improvement. Saudi Arabia, Kuwait, and the United Arab Emirates, three key OPEC oil producers in the Middle East, increased crude exports to multi-month highs in July, signalling a return of supply in an uncertain global environment.
In response to poor China data and persistent concerns about the spread of the delta variant, oil has given back some of its gains from last week. Meanwhile, the US and Israel have promised to retaliate against Iran for a deadly drone strike on a tanker last week in a crucial waterway for global oil exports. In recent months, Middle East enemies Iran and Israel have traded claims of shipping strikes. However, a Romanian and a British crew member were killed in an attack off the coast of Oman on Thursday, which Tehran denied carrying out.