Oil Slides after Saudi Oil Price Cut 

Oil prices were trading down more than 1% in energy commodities on Monday after hitting their lowest since July. This was after Saudi Arabia made the deepest monthly price cuts for supply to Asia in five months. Moreover, after optimism about demand recovery cooled amid the pandemic.

Brent crude (LCOc1) was down  55 cents at $42.11 a barrel, or 1.3% by 0642 GMT. It was sliding earlier to $41.51, the lowest since July 30.

U.S. West Texas Intermediate crude (CLc1) slid 64 cents, or 1.6%, to $39.13 a barrel. This was after dropping earlier to $38.55, the lowest since July 10.

Countries remain awashed with crude and fuel despite supply cuts by the Organization of the Petroleum Exporting Countries and its allies. Moreover, in spite of government efforts to stimulate the global economy and oil demand.

As a result, refiners have reduced their fuel output. The move has caused oil producers such as Saudi Arabia to cut prices to offset the falling crude demand.

Howie Lee, an economist at Singapore’s OCBC bank said, sentiment turned sour and there might be some selling pressure ahead.

In the United States, the Labor Day holiday on Monday marks the traditional end of the peak summer demand season. That renewed investors’ focus on the current lacklustre fuel demand in the world’s biggest oil user.

China Slows Imports

China is the world’s biggest oil commodities importer which has been supporting prices with record purchases.  According to Monday’s customs data, the Chinese government slowed its intake in August and increased its products exports.

Keisuke Sadamori, director for energy markets and security at the International Energy Agency said, there are so many uncertainties. This is with regard to the Chinese economy and their relationship with key industrialized countries. These countries include the U.S. and these days, even Europe.

It’s not such an optimistic situation, that casts some shadow over the growth outlook, Sadamori added.

Saudi Arabia, the world’s top oil exporter cut the October official selling price for Arab Light crude.  It sells this to Asia by the most since May, indicating demand remains weak. By region, Asia is Saudi Arabia’s largest market.

Last month, the OPEC+ group eased production cuts to 7.7 million barrels per day. This was after global oil prices improved from historic lows caused by the COVID-19 pandemic that cut fuel demand.

Oil is also under pressure as U.S. companies increased their drilling for new supply. This was after the recent recovery in oil prices.

Commodity news reports that energy firms in the U.S. added oil and natural gas rigs last week. This was for the second time in the past three weeks.