Futures Movers: Oil ends more than 3% lower after weaker China, U.S. economic readings

United States

Oil futures start August on a down note Monday, under heavy pressure after disappointing data on activity in China and the U.S., worries about the spread of the delta variant of the coronavirus that causes COVID-19 and rising output by OPEC+ producers.

West Texas Intermediate crude for September delivery CL00, -3.65% CLU21, -3.65% fell $ 2.69, or 3.6%, to close at $ 71.26 a barrel on the New York Mercantile Exchange. October Brent crude BRN00, +0.04% BRNV21, +0.04%, the global benchmark, closed with a loss of $ 2.52, or 3.3%, at $ 72.89 a barrel on ICE Futures Europe.

In China, data released Saturday by the National Bureau of Statistics showed the country’s official purchasing managers index fell to 50.4 in July from 50.9 in June. Numbers above 50 indicate expansion.

“A slowdown in the world’s second largest economy would be a big blow for the region at a time when numerous countries are struggling to get to grips with the latest COVID wave,” said Craig Erlam, senior market analyst at Oanda, in a note.

“Part of today’s declines may simply be a fact of timing, with the Chinese data coming at a time when you would expect to see some profit taking kicking in,” he said.

Crude added to losses after the Institute for Supply Management’s July manufacturing index slipped to a six-month low of 59.5% in July from 60.6%, coming in slightly below expectations. The reading continues to point to strong activity, but showed manufacturers are still struggling to cope with broad shortages of supplies and labor that are causing delays in production.

Meanwhile, investors also continue to track resurgent COVID-19 cases and the potential for renewed lockdowns.

The U.S. had a one-day tally of more than 100,000 new COVID-19 cases on Friday, according to Centers for Disease Control and Prevention data, the highest single-day reading since February. Most of new cases are in people who are not vaccinated, prompting public health experts to again push for more of that group to get their shots.

A fresh COVID outbreak in China has spread to new locations, raising concerns over the country’s ability to contain the outbreak of the delta variant of COVID-19, news reports said.

Meanwhile, investors are gauging rising output levels by major producers.

OPEC+ agreed last month to lift output by 400,000 barrels a day each month beginning in August until existing curbs are eliminated next year. A Reuters survey released Saturday found that OPEC members had boosted output in July by 610,000 barrels a day, to 26.72 million barrels a day.

The survey indicated OPEC members, led by Saudi Arabia, continue to be in “overcompliance” with production curbs, analysts said.

“All in all, OPEC production remains more reduced than planned, meaning that the ‘overcompliance’ has declined slightly (115% compliance in July after 118% in June),” wrote analysts at Commerzbank, in a note. “Given the current undersupply of the market, it can only be hoped that OPEC+ will make more than the planned 400,000 additional barrels per day available in August.”

Meanwhile, September natural-gas futures NG00, +1.23% NGU21, +1.23% rose 0.5% to close at $ 3.935 per million British thermal units.

September gasoline RB00, -2.45% RBU21, -2.45% tumbled 2.6% to end at $ 2.2747 a gallon, while September heating oil dropped 2.7% to finish at $ 2.1358 a gallon.