Futures Movers: Oil prices drop over 4% as China steps up efforts to contain delta variant outbreak

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Oil futures traded sharply lower Monday morning, extending last week’s tumble as China took additional steps to limit the spread of the delta variant of the coronavirus that causes COVID-19, underlining fears about global crude demand.

“Market participants are watching the rising coronavirus figures in Asia with considerable alarm, as this could prompt the Chinese government to take drastic measures in line with its strict zero covid strategy, despite numbers there still being at a low level,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note.

China, the world’s largest crude importer, has already ramped up efforts to contain the virus. Health authorities in Beijing last week canceled all large-scale exhibitions and events for August. The country has also reimposed travel restrictions, including flight cancellations and warnings by dozens of cities against travel and limits on travel by taxi and other transportation, according to news reports.

West Texas Intermediate crude for September delivery
CL00,
-3.66%

CLU21,
-3.66%

fell $2.95, or 4.3%, to $65.33 a barrel on the New York Mercantile Exchange. October Brent crude
BRN00,
-3.51%

BRNV21,
-3.51%
,
the global benchmark, dropped $2.86, or 4%, to $67.84 a barrel on ICE Futures Europe.

Both benchmarks traded at their lowest intraday levels since July 20 and were on track for the lowest finishes for most actively traded contracts since May.

Customs data out of China also contributed to the weakness, Fritsch said, showing July crude imports of 9.7 million barrels a day, roughly in line with June and remaining below 10 million barrels a day for a fourth consecutive month.

Meanwhile, Goldman Sachs cut its 2021 China growth forecast as a result of the efforts to contain the spread of the delta variant, though the bank expects a rebound later in the year.

Goldman slashed its third-quarter real gross domestic product forecast to 2.3% from 5.8%, but boosted its fourth-quarter growth forecast to 8.5% from 5.8%, leaving the full-year 2021 projection at 8.3% from a previous 8.6%.

September natural-gas futures
NG00,
-1.43%

NGU21,
-1.43%

fell 0.8% to $4.106 per million British thermal units.

September gasoline
RB00,
-2.92%

RBU21,
-2.92%

was down 3.4% at $2.18 a gallon, while September heating oil
HO00,
-3.18%

HOU21,
-3.18%

dropped 3.6% to $2.0097 a gallon.

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