Oil slumps 4% as dismal data from China highlights supply-chain risks associated with Delta variant
- The price of crude oil fell as much as 4% on Monday after pessimistic industrial and retail data out of China signaled an economic growth slowdown.
- Chinese retail sales, industrial production, fixed-asset investment, and unemployment all came in below expectations, according to official data released Monday.
- Last week, the International Energy Agency said that the resurgent Delta variant posed a significant risk to rising oil demand, especially in Asia, and slashed projections for the second half of the year.
The price of crude oil fell as much as 4% on Monday after pessimistic industrial and retail data out of China highlighted signaled a Delta variant-driven slowdown in economic activity.
July economic data released by China's statistics bureau on Monday revealed misses across the board. Retail sales, industrial production, fixed-asset investment, and unemployment all came in below expectations, underscoring the costs of China's tough "zero COVID" approach to new waves of infection.
"July's data suggest the economy is losing steam very fast," Raymond Yeung, chief China economist at ANZ, told Bloomberg. "The resurgence of Delta also adds extra risk to August's activities."
Delta has spelled complications for supply chains running through China. Last week, the country partially shut down the Ningbo-Zhoushan port in eastern Zhejiang province, one of the world's busiest, after a few workers contracted COVID. Freight rates have surged and shipping reliability has cratered as pandemic bottlenecks throttle global commerce.
Last week, the International Energy Agency said that the resurgent Delta variant posed a significant risk to rising oil demand, especially in Asia, and slashed projections for the second half of the year. The IEA now expects 500,000 barrels per day lower production, driven by lower demand.
"We now estimate that demand fell in July as the rapid spread of the COVID-19 Delta variant undermined deliveries in China, Indonesia, and other parts of Asia," the agency said.
The oil slump came alongside broader weakness in global stocks, as the weak Chinese data bit into markets that have only marched upward in recent weeks.
WTI futures were trading at $66.66 as of 10:30 a.m. ET, down 2.6% on the day.