- Chinese oil import growth expected to drop sharply
- Fund managers cut long net futures on US crude last week – CFTC
- Oil market deficit expected to last but virus darkens demand
LONDON, July 26 (Reuters) – Oil prices fell on Monday amid concerns over fuel demand caused by the spread of COVID-19 variants and as changes to China’s import rules offset supply shortage expectations for the remainder of the year.
Brent crude futures for September fell 35 cents, or 0.4%, to $ 73.75 a barrel at 11:00 GMT, while U.S. Texas Intermediate crude was at $ 71.63 a barrel, in down 44 cents or 0.6%.
Both benchmarks have slipped more than $ 1 a barrel in previous trades.
Coronavirus cases continued to rise over the weekend, with some countries reporting record daily increases and extending lockdown measures that could slow demand for oil. China, the world’s largest importer of crude, has also seen an increase in COVID-19 cases.
In addition, Beijing’s crackdown on the abuse of import quotas combined with the impact of high crude prices could see China’s oil import growth plummet to its lowest level in two decades this year, despite an expected increase in refining rates in the second half of the year. Read more
“The Delta variant continues to spread and China has started restricting teapots, so their import growth would not be that large,” said Avtar Sandu, senior commodity manager at Phillips Futures of Singapore, referring to independent refiners.
Strong US demand and tight supply expectations helped both contracts recover from a 7% drop last Monday to mark their first gains in 2-3 weeks last week.
Global oil markets are expected to remain in deficit despite the decision of the Organization of the Petroleum Exporting Countries and Their Allies to increase production until the end of the year.
The previous Monday’s liquidation also followed a report by the U.S. Commodity Futures Trading Commission (CFTC) which showed that fund managers had reduced their net long positions in U.S. crude futures and options in the past. during the week preceding July 20.
“The oil market is expected to continue to experience a significant shortfall in terms of supply versus demand,” said Stephen Brennock of oil broker PVM.
“As much as this will maintain a floor below prices, it does not mean that they will rise sharply from current levels. That’s because demand fears fueled by the pandemic haven’t completely lost their grip on market sentiment. “
Additional reporting by Florence Tan; Editing by Tomasz Janowski and Bernadette Baum
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