By Adedapo Adesanya
Oil fell further on Monday after Saudi Arabia slashed crude contract prices for Asia as part of its plans to capture the world’s largest importer.
The action revived concerns over the demand outlook as the price of the Brent crude fell by 39 cents or 0.54 per cent to settle at $72.22 per barrel, while the West Texas Intermediate (WTI) crude slid by 40 cents or 0.58 per cent to settle at $68.89 a barrel.
Saudi Arabia cut oil prices for sales to Asia next month by more than twice the expected amount in a sign the world’s largest crude exporter wants to entice buyers to take more of its barrels.
By lowering pricing for Arab Light crude, its main oil grade, by $1.30 a barrel to a premium of $1.70 more than the regional benchmark, it wants buyers to take more Saudi crude as it risks isolating customers if it sets monthly prices too high.
For October, Saudi official prices for cargo sales to the US, northwest Europe, and the Mediterranean were stable or slightly changed, pointing to the producer’s intent on prioritizing oil flows to Asia.
The Organisation of the Petroleum Exporting Countries and allies (OPEC+) this month decided to continue rolling back supply cuts implemented last year to support prices as the coronavirus slashed demand.
Led by Saudi Arabia and Russia, the oil cabal is moving cautiously to get oil back onto the market amid continued flare-ups of the virus that are slowing economic recovery.
Demand has improved from the depths of last year and the OPEC+ cuts have helped support markets with Brent trading as high as $78 a barrel.
Traders are closely watching for the return of oil production and refineries affected by Hurricane Ida.
The US granted a second refiner in Louisiana access to the country’s emergency crude stockpiles as about 1.5 million barrels per day of oil production in the Gulf remain shut-in after the hurricane, the Bureau of Safety and Environmental Enforcement (BSEE) said on Monday.
It is releasing crude from the strategic petroleum reserves as production in the Gulf Coast struggles to recover.
In addition, it remains challenging for analysts and traders to form a cohesive picture of the global demand outlook due to the continuing spread of the virus.
Still, fuel consumption in the US has climbed to a record, while crude inventories at key storage hubs such as Saldanha Bay have also dipped, a sign that the pandemic-induced glut is quickly dissipating.
Dipo Olowookere