Oil prices declined by more than one percent on Monday as concerns regarding slowing China’s economic activity weigh on market sentiment.
Brent crude oil, against which Nigerian oil is priced, dipped by 1.3 percent or 90 cents to $69.69 a barrel as at 8:36 am Nigerian time while the U.S. West Texas Intermediate (WTI) declined by 1.4 percent or 97 cents to $67.47 a barrel.
The data released on Monday shows China’s factory output and retail sales growth slowed and missed expectations in the month of July as new COVID-19 outbreaks and floods disrupted business operations in cities, further adding to concerns the economic recovery is losing momentum.
China, the world’s second-largest economy and the largest importer of crude oil recorded 6.4 percent year-on-year growth on factory output in July, against 8.3 percent posted in June and 7.8 percent expected by analysts.
Retail sales grew by 8.5 percent year-on-year, down from 12.1 percent achieved in June and below 11.5 percent predicted by analysts.
“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.”
Data also showed Chinese crude oil processing declined in the month of July to the lowest on a daily basis since May 2020 when COVID-19 was at its peak. Suggesting that refiners are cutting production amid tighter quotas, elevated inventories and declining profits, a situation expected to hurt global crude oil demand given the size imported by China.
This was in line with the International Energy Agency report on Thursday that rising demand for crude oil changed course in July and was expected to increase at a slower rate over the rest of 2021 due to rising COVID-19 infections.