Oil prices fell by more than 1% on Monday after touching their lowest points since July as Saudi Arabia made the most profound monthly price cuts for supply to Asia in five months and hopes about demand recovery faded amidst the corona virus pandemic.
Brent crude was at $41.99 a barrel, down 67 cents or 1.57% by 11:28 at West Africa Time, after earlier sliding to $41.51, the lowest since July 30.
U.S. West Texas Intermediate crude slid by 70 cents, or 1.76%, to $39.07 a barrel after earlier dropping to $38.55, the lowest since July 10.
On the previous session on Friday, Bonny Light, Nigeria’s premium oil grade, shed 60 cents or 1.43% to $41.40 per barrel. Qua Iboe, another key national grade, slipped by $1.72 or 3.93% to $42.09.
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The world remain saturated with crude and fuel in spite of the output cuts by the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, government’s moves to boost the global economy and oil demand.
Refiners have reduced their fuel output as a result, prompting oil producers such as Saudi Arabia to slash prices in a bid to offset the falling crude demand.
“Sentiment has turned sour and there might be some selling pressure ahead,” Howie Lee, an economist at Singapore’s OCBC bank said.
The Labour Day holiday on Monday signals the traditional end of the peak summer demand season in the U.S. and that renewed investors’ attention on the present abysmal fuel demand in the world’s biggest oil user.
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China, the world’s biggest oil importer which has been helping prices with record purchases, slowed its import in August and ramped up its products exports, according to customs data on Monday.
“There are so many uncertainties with regard to the Chinese economy and their relationship with key industrialized countries, with the U.S. and these days, even Europe. It’s not such an optimistic situation – that casts some shadow over the growth outlook,” Keisuke Sadamori, director for energy markets and security at the International Energy Agency told Reuters.
Saudi Arabia, the world’s top oil exporter, slashed the October official selling price for Arab Light crude it sells to Asia by the most since May, reflecting demand remains weak. Asia is Saudi’s biggest market by region.
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The OPEC+ group reduced production to 7.7 million barrels per day in August after the global oil prices rose from historic lows triggered by the pandemic cutting fuel demand. Oil is also strained as United States companies increased their drilling for new supply following the recent recovery in oil prices.
Last week, U.S. energy firms added oil and natural gas rings for the second time in three weeks, report by Baker Hughes Co on Friday.
By Chibisi Ohakah, Abuja