Saudi Arabia made its deepest monthly price cut for supply to Asia in five months, and optimism about the recovery in demand waned with the outbreak. Oil prices fell more than 1% on Monday after hitting their lowest since July last week.
Brent crude LCOc1 was at $42.11 a barrel, down 55 cents or 1.3% by 0642 GMT, after earlier sliding to $41.51, the lowest since July 30.
West Texas Intermediate crude CLc1 skidded 64 cents, or 1.6%, to $39.13 a barrel after earlier dropping to $38.55, the lowest since July 10.
Despite supply cuts by the Organization of Petroleum Exporting Countries (OPEC) and its allies known as OPEC +, and efforts by governments to stimulate the global economy and demand for oil, the world is grappling with crude oil and fuel. Refineries reduce fuel production and oil producers such as Saudi Arabia had to lower their prices to compensate for falling crude oil demand. It is very likely that there will be sales pressure in the future.
Monday’s Labor Day holiday marks the end of the traditional busy summer season in the United States. Investors will have to focus on the course of fuel demand in the world’s largest oil consumer.
China, the world’s largest importer, supporting oil prices with record purchases, slowed its purchases in August and increased its product exports, according to customs data on Monday. There is a lot of uncertainty regarding the relations of the Chinese economy with the US and even the major industrialized countries with Europe.
All of this is not such an optimistic situation and compromises the growth outlook.
The world’s largest oil exporter, Saudi Arabia, pointed out that demand remained weak, reducing the official sale price of its crude oil sold to Asia, its largest market, in October to the lowest level since May.
In August, the OPEC group reduced production cuts to 7.7 million barrels a day after the coronavirus pandemic recovered from historic lows caused by a decline in global fuel demand.
Demand concerns and increased supply negatively affect the price. Following the recent rebound in oil prices, US companies are increasing their drilling activities for new supply, fueling this concern. US energy firms increased the number of oil and gas rigs last week for the second time in the last three weeks.