Oil futures: Prices rebound from lows, but down around 3% on China slowdown fears
Quantum Commodity Intelligence - Crude oil futures back from earlier lows during choppy US trading hours Monday, but prices were still around 3% down on the day as further curbs were rolled out across China to combat the spread of Covid-19.
Front-month October ICE Brent futures were trading at $68.64/barrel (1815 GMT), compared to Friday’s settle of $70.70/b and an intraday low of $67.60/b, a drop of more than 4%.
At the same time, September NYMEX WTI was trading $66.02/b, versus Friday’s settle of $68.28/b and an earlier low of $65.15/b.
The losses extend last week's falls, when Brent prices dropped by over 6% and WTI was down by more than 7%.
Cases remain relatively low in China, but the country's zero Covid policy means that travel restrictions are extensive.
"Market participants are watching the rising coronavirus figures in Asia with considerable alarm, as this could prompt the Chinese government to take drastic measures in line with its strict zero Covid strategy, despite numbers there still being at a low level," said Commerzbank in an investor note.
Global airline passenger capacity shrunk below 76 million seats last week, usually one of the busiest in the aviation calendar, as Chinese carriers cut 5.2 million seats, or 31.9%, over the last seven days amid the resurgence of Covid, warned aviation agency OAG Monday.
Last week energy consultancy FGE said China’s crackdown has knocked out some 300,000 barrels per day of jet fuel consumption and 150,000 bpd of domestic gasoline demand, but warned these figures could increase with further restrictions.
China’s crude oil imports are already sharply lower from last summer’s record levels, but the situation has been accentuated by the steep cut in import quotas available to independent refiners.
Goldman Sachs downgraded its economic growth forecast for China as measures to contain the fast-expanding Covid-19 resurgence curb spending.
The bank cut its full-year GDP growth forecast to 8.3% from 8.6%, according to a report released late Sunday.
The dollar was up Monday in Asia, climbing towards a four-month high against the euro. The US Dollar Index that tracks the greenback against a basket of other currencies was eyeing 93.
Meanwhile, two weather systems over the Atlantic have attracted interest among storm watchers - Invest 94L leads the way followed by 93L - the designations assigned by the National Hurricane Center when a system becomes an ‘investigative area’.
Should either of these weather systems intensify enough to form into a storm, it will be assigned the name Fred, the first named storm since Elsa in early July.