Oil prices fall 4% on surge in Covid cases around the world, continuing to decline after worst week since October

Oil prices fell on Monday, building on large losses last week, as rising Covid cases raised fears of slowing demand.

West Texas Intermediate crude futures fell 3.6% to trade at $ 65.85 per barrel. The contract traded as low as $ 65.15 earlier in the session. International benchmark Brent crude fell 3.5% to $ 68.21 a barrel.

“The biggest challenge for the oil markets remains the uncertainty around COVID, as the ‘delta variant’ has had the highest daily number of cases since early 2021,” Bank of America analysts noted.

Last week, both contracts fell more than 7% for their worst week since October. The drop came amid demand concerns as well as a surprise increase in US crude inventories. The US Energy Information Administration said Wednesday that crude inventories rose 3.6 million barrels the previous week, while analysts polled by FactSet expected a drawdown of 2.9 million barrels. Gasoline inventories, however, fell 5.3 million barrels more than expected.

Data from China also weighed on crude on Monday. The country’s export growth unexpectedly slowed in July, while imports rose 28.1% from the previous year. This was below forecasts which called for a 33% increase.

China, which is the world’s second-largest consumer of oil, imported 9.7 million barrels per day in July, the fourth consecutive month below 10 million barrels per day, according to analysts at Commerzbank.

“The fall in prices continues [Monday] amid growing concerns about demand again, ”the company wrote in a note to customers. “Market participants are watching with great concern the increase in coronavirus figures in Asia, as this could prompt the Chinese government to take drastic measures in accordance with its strict zero Covid. strategy.”

A possible slowdown in demand as parts of the world reinstate lockdown measures follows OPEC and its allies which have further increased production this month. In April 2020, the group implemented record production cuts of nearly 10 million barrels per day as the pandemic squeezed demand for petroleum products.

Oil has slowly recovered and WTI is still up 40% for 2020. In July, the contract traded as high as $ 76.98, a price not seen since 2014.

“The oil market is expected to remain limited here as the physical market is poised to remain in deficit until the end of the year,” said Tom Essaye, editor of the Sevens Report.

– CNBC’s Michael Bloom contributed reporting.