The Party is not opposed to sexual activity because they consider sex somehow wrong or sinful. Instead, the opposition to sex has to do with beliefs about how sexuality affects people's psychological states. It should be noted that some of Orwell's ideas which are reflected in the novel are based on classical Freudian psychology and are not necessarily what 21st century scientists might believe.
The first issue for the Party is that romantic or sexual relationships inspire love or loyalty to something other than the Party and that this may lead to subversive thinking as the lover starts to realize that there is something more important than the Party.
Next, the Party believes that the sort of energy required for fanatical devotion to the Party flows in part from repressed sexuality (a version of classical Freudian theory). Thus the Party attempts to channel repressed sexual energies into labor and hatred of "enemies" of the Party, creating an energetic and fanatical cadre of party loyalists.
Julia astutely points this out in the following passage:
It was not merely that the sex instinct created a world of its own which was outside the Party's control and which therefore had to be destroyed if possible. What was more important was that sexual privation induced hysteria, which was desirable because it could be transformed into war-fever and leader-worship
The Party's view on sex is mostly revealed through one of the meetings between Julia and Winston. It is described as "sexual puritanism" (p. 139), and of course like all facets of life the party seeks to have control over it. Julia explains that the sex act uses up energy and leaves the individual feeling light headed and carefree, which is of course unacceptable to the tyrannical Party. Winston further reasons that the Party sought to control the sex urge not only because it was a possible threat, but also because by repressing the urge it would manifest into behaviour which would suit party purposes. He realises that there is an "intimate connection between chastity and political orthodoxy" (p.140).
Julia and Winston realise that in effect the Party has used the repression of sex to heighten the citizenry's angst and frustration, and then to harness those feelings into the angry hysteria required in such party activities as Hate Week. Whilst the sex act has the potential to be harmful to the party because it inherently produces a carefree state, the Party has skilfully used its repression to further entrench their own power.