But Kemp says the medium-term outlook is still bullish: File Image/Pixabay
Weak economic data from China, said to be the result of restrictions to combat the surge of the Delta variant in that country, caused another price drop for oil on Monday - this time by almost 2 percent.
After it was learned that China's oil refining slumped to the lowest level in 14 months to below 14 million barrels per day (bpd) amid Covid restrictions, Brent settled down $1.08, or 1.5 percent, to $69.51 per barrel; West Texas Intermediate fell by $1.15, or 1.7 percent, to $67.29 per barrel.
Data on Monday also showed China's economic activity slowed more than expected in July, with retail sales and industrial output missing targets and unemployment on the rise.
Bart Melek, TD Securities
We are moving from expectations of a robust deficit to a potential surplus
Bart Malek, head of global commodity strategy at TD Securities, echoed the fear of his colleagues by saying, "As data begins to reflect the full impact of the shutdown in China, investors are worried this negative trend we're seeing won't just be a localized issue.
"We are moving from expectations of a robust deficit to a potential surplus as the variant continues to halt the growth rate of demand."
Many analysts also expect modest economic growth for Japan, where renewed emergency restrictions have been imposed to deal with infections.
John Kemp, commodities analyst at Reuters, reminded readers on Monday that portfolio managers "remain bullish about the medium-term outlook for petroleum prices, but less so than at the start of the northern summer before coronavirus infection rates started to rise again."
Curiously, U.S. low-sulphur diesel futures and options have been the exception to the bull market's deflation, with long positions outnumbering shorts by 3.5:1, the highest since October 2018: Kemp said, "The last time hedge fund managers were this bullish about diesel was before the intensification of the trade war between China and the United States."
Overlooked in Monday's trading was the abiding conviction of pundits that the Delta infections are transitory as more and more of the world's population receives vaccinations: indeed, Worldometer on Monday showed that U.S. Covid cases dropped 3 percent last week; the data agency also showed that for 210 countries listed, weekly infections dropped in over 90 (including India and Russia), and over 125 countries reported either no change or a substantial drop in the weekly death rate.