Oil Price Drops 3% On Reduced China Demand, Strong Dollar

Oil prices fell by almost 3% on Monday, extending last week's steep losses on the back of a rising US dollar and concerns that new coronavirus-related restrictions imposed in Asia, especially China, could slow a global recovery in fuel demand, Dmitry Zhdannikov reported for Reuters.

Photo Insert: The global oil trade remains volatile.

Brent crude futures fell by $1.87, or 2.6%, to $68.83 a barrel by 1330 GMT after a 6% slump last week for their biggest weekly loss in four months. US West Texas Intermediate (WTI) crude futures fell $1.96, or 2.9%, to $66.32 after plunging by nearly 7% last week.

On Monday the contract fell as low as $65.15, its lowest since May.

"Concerns about potential global oil demand erosion have resurfaced with the acceleration of the Delta variant infection rate," RBC analyst Gordon Ramsay said in a note. ANZ analysts pointed to new restrictions in China, the world's second-largest oil consumer, as a major factor clouding the outlook for demand growth.

The restrictions include flight cancellations, warnings by 46 cities against travel and limits on public transport and taxi services in 144 of the worst-hit areas. On Monday, China reported 125 new COVID-19 cases, up from 96 a day earlier. In Malaysia and Thailand, infections hit daily records.

China's export growth slowed more than expected in July after outbreaks of COVID-19 cases and floods, while import growth was also weaker than expected.

"Both (benchmark crude) contracts look vulnerable to more bad news on the virus front, focusing on mainland China," OANDA senior market analyst Jeffrey Halley said in a note.

WEEKLY FEATURE : PAL READY TO SOAR WITH PANDEMIC