Oil shares fall as crude weakens due to China COVID curbs and a lower GDP forecast

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Energy stocks slumped across the board in the premarket on Monday as crude prices plummeted and major investment banks lowered their GDP predictions for China because of mounting COVID-19 cases in the world’s second-largest economy. Shares of integrated oil corporations and standalone oil explorers also declined. Shell’s (LON: RDSa) ADR dropped the least. It had fallen by 1%. Exxon Mobil (NYSE: XOM), Chevron (NYSE: CVX), and BP (NYSE: BP) all lost about 1.4 percent. Occidental Petroleum (NYSE: OXY) was down 2.7 percent, while Marathon Oil (NYSE: MRO) was down 3.8 percent.

Brent sank 4% to $67.80 per barrel by 0515 ET, following a 6% drop last week for the worst weekly loss in four months. Crude futures sank 4.4 percent to $65.28 after falling nearly 7 percent the previous week, the steepest weekly drop in nine months.

Crude oil imports in China, the world’s largest energy consumer, dipped in July and were down substantially from record levels in June 2020, fueling fears that the world’s major economies’ recovery will be a lengthy and painful process. JPMorgan Chase, Goldman Sachs, and Morgan Stanley all lowered their China growth projections on Monday after the government published lower-than-expected import and export figures.

JPMorgan decreased its third-quarter growth projection for the country to 2% from 4.3 percent and lowered its full-year forecast to 8.9 percent from 9.1 percent.

Goldman reduced its quarterly forecast to 2.3 percent from 5.8 percent, and its full-year forecast to 8.3 percent from 8.6 percent. Morgan Stanley reduced its quarterly growth prediction to 1.6%. China reported 125 new COVID-19 cases on Monday, up from 96 the day before, reigniting fears that the virus is here to stay, even as governments battle vaccination hesitancy and seek for greater vaccine availability. In Malaysia and Thailand, infection rates are breaking records on a daily basis.

As floods ravaged sections of the country, China’s export growth slowed more than predicted in July. Import growth was also below expectations.