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Oil drops for 3rd day as China delta outbreak threatens demand

China’s latest outbreak has spread to Beijing despite the capital’s stringent measures, with authorities taking steps Tuesday to ban rail passengers from 23 regions (Photo: Bloomberg)Premium
China’s latest outbreak has spread to Beijing despite the capital’s stringent measures, with authorities taking steps Tuesday to ban rail passengers from 23 regions (Photo: Bloomberg)

WTI futures slumped 2.9%, after retreating 4.6% in the previous two sessions. The delta strain of Covid-19 has been detected in almost half of China’s 32 provinces in just two weeks, and at least 46 cities have advised residents not to travel unless strictly necessary

Oil declined for a third day as the coronavirus spread in China and a report showed US companies added fewer jobs than expected in July.

West Texas Intermediate futures slumped 2.9%, after retreating 4.6% in the previous two sessions. The delta strain of Covid-19 has been detected in almost half of China’s 32 provinces in just two weeks, and at least 46 cities have advised residents not to travel unless strictly necessary. Meanwhile, the slowdown in US. hiring underscores the challenges in reaching a full economic recovery.

“Crude oil continues to trade soft with the focus on the risk to demand from a fast-spreading outbreak of the delta coronavirus variant in key importer China," said Ole Hansen, head of commodities research at Saxo Bank A/S.

After a small advance in July, August is proving to be tough for crude. Tightened controls in some Asian nations to curb the spread of the virus risk eroding oil demand at a time when the Organization of Petroleum Exporting Countries and its allies are gradually increasing supply.

China’s latest outbreak has spread to Beijing despite the capital’s stringent measures, with authorities taking steps Tuesday to ban rail passengers from 23 regions. The financial hub of Shanghai also reported a virus case this week. As risks escalate, analysts are reviewing their economic growth projections.

Still, there are positive signs for oil elsewhere. US crude stockpiles may have dropped further, with the American Petroleum Institute reporting a 879,000-barrel weekly decline, according to people familiar with the data. Gasoline holdings shed 5.75 million barrels, the people said. Official government numbers are due later on Wednesday.

There have also been rising tensions near the Persian Gulf -- a region vital for the world’s oil markets -- in the past week. The British Navy said a ship was safe following a possible hijacking near Iran, days after a deadly drone attack on a tanker that the US, UK and Israel all blamed on the Islamic Republic.

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