WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange slid in early trade Monday after heavy flooding and typhoons in China prompted concerns over short-term demand weakness in the world's largest oil importing country, and as a rapidly spreading Delta variant of coronavirus led to renewed travel and mobility restrictions across several Asia-Pacific countries.
Growing coronavirus outbreaks across Asia and the Western Pacific prompted renewed restrictions on travel and business from Sydney to Bangkok, stoking concern over deteriorating fundaments for global oil demand. Thailand and Malaysia both reported a record number of new infections Friday, while Indonesia registered its highest single-day increase in COVID-related deaths. New Zealand announced last week that it was suspending a travel bubble with pandemic-hit Australia until the health crisis there is resolved.
"Southeast Asia is one of the least vaccinated regions in the world," said Yasir Arafat, a regional health adviser, adding that "it also has an extremely low testing rate, so it's likely that things are even worse than the data suggests."
Heavy flooding and gusty winds from Typhoon In-fa prompted Chinese officials to shut down the Shanghai municipality -- one of the nation's largest city. According to China's National Meteorological Center, provinces of Zhejiang and Jiangsu, as well as all of eastern China, will be continually affected by heavy winds and torrential rains over the next couple of days. Typhoon has also disrupted supply of electricity and network of subway as well as all above ground traffic, with some roads reportedly submerged with water. The two airports in the city cancelled all flights on Sunday, with hundreds of more flights grounded on Monday.
In financial markets, U.S. equity futures retreated from record highs on Monday ahead of a busy week for economic data and potentially game-changing policy meeting from the Federal Reserve. Should Fed Chairman Jerome Powell use Wednesday afternoon's news conference to signal any change to the central bank's accommodative policy, investors would likely reassess growth prospects, inflation, and earnings expectations for the rest of the year. Rising COVID-19 cases and higher-than-expected inflation data have already tamed some of those expectations.
Last week's unemployment claims unexpectedly rose to 419,000, the highest level since May 15, signaling an uneven recovery in the labor market. This comes amid expectations that job growth should accelerate into the fall as enhanced unemployment benefits end and schools reopen. Furthermore, U.S. service sector companies this month registered the softest expansion in growth since February, according to Friday's U.S. Composite Purchasing Manufacturing Index which slowed to 59.7 in July from 63.7 in June.
Near 7:45 a.m. ET, NYMEX September West Texas Intermediate futures fell below $72 per barrel (bbl) at $71.70 bbl, and the international crude benchmark Brent contract for September delivery declined to $73.85 bbl. NYMEX August RBOB contract fell 0.88 cents to $2.2825 gallon and August ULSD futures edged down to trade near $2.1295 gallon.
Liubov Georges can be reached at email@example.com