WASHINGTON (DTN) -- Nearby delivery month oil futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange extended losses into the fourth consecutive session early Tuesday, sending U.S. crude benchmark below $67 per barrel (bbl) on a combination of concerns over slowing global demand growth stemming from sporadic COVID-19 outbreaks in China and elsewhere in southeast Asia that have led to renewed restrictions on mobility and closure or reduced operations at key shipping ports, and signs of decelerating economic growth domestically.
China's refinery output in July fell to the lowest since May 2020 at 13.9 million barrels per day (bpd) or 0.9% below the same month last year, according to the data released from the National Bureau of Statistics. That was the first year-on-year decline since March last year when coronavirus hammered Chinese fuel demand.
A government crackdown on independent plants, also known as teapot refineries, combined with a growing number of COVID-19 outbreaks in several of China's major industrial hubs led to a sharp decline in refinery output last month. The world's second largest economy also lost steam in the third quarter, with last month's retail sales, industrial production and fixed asset investment falling far short of expectations. Retail sales, a key measurement of consumer spending fell 0.13% in July, down from the 0.48% increase in June, and below a projection for 11.5% annualized growth. Industrial production, a gauge of activity in the manufacturing, mining and utilities sectors, grew by 6.4% in July from a year earlier after an 8.3% rise in June.
"Given the combined impact of sporadic local outbreaks of COVID-19 and natural disasters on the economy of some regions, the economic recovery is still unstable and uneven," said NBS spokesman Fu Linghui.
Domestically, a sharp fall in consumer sentiment this month, joined with slowing manufacturing output and expectations for July's retail sales to fall after several months of strong readings have investors questioning the pace of second half growth as well as the timing of the Federal Reserve's plans to taper its monthly bond purchases. Fed Chairman Jerome Powell could shed some light on that issue during today's virtual Town Hall meeting at 1:30 p.m. ET ahead of central bank's symposium in Jackson Hole, Wyoming, later this month.
Oil traders are also monitoring the impact to gasoline demand in Florida and other Atlantic Coast states following flash flooding brought about by Tropical Depression Fred. Tropical Storm Fred made landfall late afternoon Monday and is expected to dissipate in the mid-Atlantic states over the next 24 hours. As Fred was downgraded, however, a tornado watch was issued for much of central and north Georgia on Tuesday.
The development is bearish for regional gasoline demand, with seasonal decline in consumption already seen steeper this year due to the lack of commuting to work and the rising tally of COVID-19 infections. The U.S. Energy Information Administration forecasts gasoline consumption won't return to pre-pandemic levels even next year, averaging about 9 million bpd, some 300,000 bpd below the 9.309 million bpd 2019 average.
The prospect of weaker gasoline demand joined with concerns over slowing global growth have sent oil prices lower in early trade, with NYMEX September West Texas Intermediate futures marked $0.62 lower near $66.78 bbl, and the international crude benchmark Brent October contract declined $0.36 to $69.16 bbl. NYMEX September RBOB futures softened 0.37 cents to $2.1972 gallon and NYMEX September ULSD futures fell to $2.0414 gallon.
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