Saudi Arabia’s Price Cut Hurts Crude Oil Market, Brent Down 2%
Saudi Arabia’s price cut on its light oil for Asian customers has affected crude oil prices as Brent slowdown more than 2% on Monday to $71.14 after closing stronger at the weekend.
The Organisation of Petroleum Exporting Countries (OPEC) de factor member and the world’s top exporter Saudi Arabia cut crude contract prices for Asia over the weekend, reflecting well-supplied global markets and concerns over the demand outlook.
The decision signal possible demand weakness, according to some analysts amidst the oil cartel decision to uphold 400,000 barrels of oil per day increment for the rest of the year.
International benchmark Brent crude dropped to $71.14 per barrel, representing a 2.02% decrease from $72.61 a barrel at the weekend.
American benchmark West Texas Intermediate (WTI) traded at $68.47 a barrel at the same time for a 1.18% decline after ending the previous session at $69.29 per barrel.
State oil giant Saudi Aramco announced on Sunday that it will lower the Arab Light crude for its Asian customers by $1.30 in October. The largest monthly reduction in a year indicated falling demand in the region and weighed on prices.
The Saudi price cut came after lockdowns across Asia to battle the highly infectious delta coronavirus variant, curbed oil demand in the region.
Further price slumps were limited by concerns that US supply would be curtailed in the aftermath of Hurricane Ida.
According to the US Bureau of Safety and Environmental Enforcement, 88.3% of the current oil production and 82.7% of the natural gas production in the Gulf of Mexico have been shut-in.
The monthly Energy Information Administration (EIA) report (U.S. government data) due out Wednesday will be eagerly watched and in case of demand estimates for the balance of this year and for 2022 remain solid the market could easily edge towards the high seen in July.”
The decline in crude futures added to falls on Friday after a weaker than expected U.S. jobs report indicated a patchy economic recovery that could mean slower fuel demand during a resurgent pandemic.
Losses were capped by concerns that U.S. supply would remain limited in the wake of Hurricane Ida. The U.S. government is releasing crude from strategic petroleum reserves as production in the U.S. Gulf Coast struggled to recover.
Some 1.7 million barrels of oil and 1.99 billion cubic feet of natural gas output remained offline, government data released on Friday showed, while power shortages are preventing some refineries from resuming operations.
The hurricane also led U.S. energy firms last week to cut the number of oil and natural gas rigs operating for the first time in five weeks, data from Baker Hughes showed on Friday. The oil rig count fell the most since June 2020.
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Saudi Arabia’s Price Cut Hurts Crude Oil Market, Brent Down 2%
