Oil prices fall by over 1% on Monday morning
Oil prices were down by over 1% during the morning session on Monday as negative economic data emerged from China highlighting the impact of the coronavirus pandemic on the economy.
Brent crude was down 1.21% at $69.40 a barrel by 0857 GMT, while West Texas Intermediate fell by 1.28% to $67.16 per barrel.
Growth in retail sales and factory output slowed well down in July in China, failing to meet expectations as new outbreaks of Covid-19 interrupted business.
“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.”
The International Energy Agency said last week that raised demand for crude oil switched back in July and it now expects demand for the commodity to rise at a slower rate for the remainder of 2021. This is down to the prevalence of the Delta variant of the coronavirus.
The news raises question marks over the near-term outlook for oil after Joe Biden called on OPEC and its allies to raise its levels of output in a bid to keep rising fuel prices under control, as inflation in America reaches its highest yearly growth rate in 13 years.
Some analysts remain bullish on the commodity despite some recent bad news.
Bank of America commodities strategist Francisco Blanch is making the case of $100 per barrel oil in 2022 as supply will begin to fall.
“First, there is plenty of pent up mobility demand after an 18 month lockdown. Second, mass transit will lag, boosting private car usage for a prolonged period of time. Third, pre-pandemic studies show more remote work could result in more miles driven, as work-from-home turns into work-from-car. On the supply side, we expect government policy pressure in the U.S. and around the world to curb capex over coming quarters to meet Paris goals. Secondly, investors have become more vocal against energy sector spending for both financial and ESG reasons. Third, judicial pressures are rising to limit carbon dioxide emissions. In short, demand is poised to bounce back and supply may not fully keep up, placing OPEC in control of the oil market in 2022,” said Blanch.