The Australian market has fallen sharply, as oil prices jumped to a three-year high and prolonged COVID lockdowns across the nation led to another slump in retail sales.

The benchmark ASX 200 closed 1.5 per cent lower at 7,276 points, wiping out all its gains from the past week. Eight out of every 10 stocks traded lower.

Oil and gas stocks recorded the biggest gains, like Beach Energy (+10.5pc), Whitehaven Coal (+6.5pc), Origin Energy (+5.3pc), Woodside Petroleum (+5pc), Santos (+5.6pc) and Oil Search (+7.1pc).

Healthcare, mining and tech stocks were the weakest performers, including Fortescue Metals (-5.6pc), Pro Medicus (-6.7pc), Megaport (-4.6pc), TechnologyOne (-4.7pc), Appen (-4.4pc) and Xero (-6.4pc).

The Australian dollar lifted moderately to 73 US cents.

Retail turnover slumps

COVID lockdowns have continued to weigh heavily on Australia’s retailers as sales dropped for a third straight month, according to the latest figures from the Bureau of Statistics (ABS).

Retail turnover fell 1.7 per cent to $29.3 billion in August, following a 2.7 per cent slump in July and a 1.8 per cent slide in June.

The $360 billion retail sector accounts for around 18 per cent of Australia’s economic output and further weakness is expected this month with Sydney, Melbourne and Canberra all locked down.

NSW, Victoria and the ACT experienced falls “in line with their respective level of restrictions”, said Ben James, the ABS director of quarterly economy wide surveys,.

“In direct contrast, states with no lockdowns performed well with Western Australia and South Australia enjoying strong rises as physical stores were open for trade.”

“Another full month of lockdown” led to a sharp fall in NSW’s retail turnover. It dropped 3.5 per cent to its lowest level since April 2020.

Victoria’s turnover slumped by 3 per cent. But the ACT fared even worse as a snap lockdown on August 5 led to the territory’s 19.9 per cent drop in retail turnover.

Retailers counting on rising vaccinations

While the entire economy is certain to shrink sharply this quarter, relief is in sight with NSW just a couple of weeks from easing restrictions as people flock to get jabbed.

After an agonisingly slow start, almost 86 per cent of the adult population in NSW have now had a first shot and 60 per cent are double dosed.

Yet the pandemic has also massively accelerated the adoption of online sales both by consumers and retailers.

Online sales of food have doubled on pre-pandemic levels and even fine dining restaurants have gotten into the game, selling take-away courses and assemble-at-home gourmet meal kits.

Extended physical store closures across Australia led to massive falls across several industries last month. The biggest falls were seen in clothing, footwear and personal accessory retailing (-15.7pc), cafes, restaurants and takeaway food services (-7pc), department stores (-10.2pc), and household goods retailing (-2.3pc).

“However, that doesn’t really do justice to the damage caused by these extended lockdowns,” said Callum Pickering, an economist from job hunting website Indeed.

“Since May, covering a three-month period, spending on clothing & footwear has declined by 35 per cent, with department store spending down 26 per cent and cafes & restaurants down 23 per cent.”

Oil surge boosts energy sector

Energy stocks were boosted by oil prices, which surged for a sixth straight day, as investors fretted about tighter supplies because of rising demand in parts of the world.

Brent crude futures lifted 1.3 per cent (to $US80.59 a barrel) its highest level since October 2018. This was on top of its 1.8 per cent jump overnight (during the US and European trading sessions).

“Investors remained bullish as supply disruptions in the United States from hurricanes are continuing for longer than expected at a time when demand is picking up due to easing lockdown measures and the wider rollouts of COVID-19 vaccination,” said Chiyoki Chen, chief analyst at Sunward Trading.

Hurricanes Ida and Nicholas, which swept through the US Gulf of Mexico in August and September, damaged platforms, pipelines and processing hubs, shutting most offshore production for weeks.

Also weighing on supply, top African oil exporters Nigeria and Angola will struggle to boost output to their quotas set by the Organization of the Petroleum Exporting Countries (OPEC) until at least next year as underinvestment and nagging maintenance problems continue to hobble output, sources at their respective oil firms warn.

Their battle mirrors that of several other members of the OPEC+ group who curbed production in the past year to support prices when COVID-19 hit demand, but are now failing to ramp up output to meet soaring global fuel needs as economies recover.

The supply issues are occurring as countries ease their COVID-19 movement restrictions, potentially boosting demand.