Oil prices fell on Sept. 6, extending losses after Saudi Arabia, the world’s top oil exporter, slashed crude contract prices for Asia over the weekend, reflecting well-supplied global markets and concerns over the outlook for demand.
Brent crude futures fell by 0.17 percent to $72.1o per barrel as of 6:29 p.m. BST on Sept. 6, while U.S. West Texas Intermediate crude was at $68.89 per barrel, down by 0.58 percent, at 3:08 p.m. New York time.
The deep price cuts come as lockdowns across Asia to combat the Delta variant of the CCP (Chinese Communist Party) virus have capped fuel demand in the region. Prices in northwestern Europe and the United States have remained steady.
State oil giant Saudi Aramco notified customers in a statement on Sept. 5 that it will cut October official selling prices (OSP) for all crude grades sold to Asia, its largest buying region, by at least $1 a barrel.
The price cuts were larger than expected, according to a Reuters poll of Asian refiners.
“The OSPs to Asia are bearish, signaling softer demand and potentially higher supply,” Energy Aspects analyst Virendra Chauhan said.
Global oil supplies are increasing as the Organization of the Petroleum Exporting Countries and their allies, a grouping known as OPEC+, is raising output by 400,000 barrels per day each month between August and December.
“Given that OPEC+ is continuing its plan to raise production monthly, despite weak data from China and the U.S. raising slowdown fears and Saudi Arabia looking for market share in the region, oil is likely to remain under pressure,” said Jeffrey Halley, a senior market analyst for the Asia Pacific at brokerage OANDA.
The decline in crude futures added to a fall on Sept. 3, after a weaker than expected U.S. jobs report indicated a patchy economic recovery that could mean slower fuel demand during a continuing pandemic.
The lackluster non-farm payrolls report showed U.S. employers adding far fewer jobs in August than expected, with non-farm payroll employment rising by 235,000 in August, down from an upwardly revised 1.05 million jobs added in July and far below the FactSet-provided consensus forecasts of 750,000.
Losses were capped by concerns that U.S. supply would remain limited in the wake of Hurricane Ida, which catastrophe modeling company Karen Clark & Co. has estimated could cost insurers roughly $18 billion, Reuters reported.
The U.S. government is releasing crude from strategic petroleum reserves as production in the U.S. Gulf Coast struggled to recover. Roughly 1.7 million barrels of oil and 1.99 billion cubic feet of natural gas output remained offline, government data released on Sept. 3 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 Sept. 3. The oil rig count fell the most it had fallen since June 2020.
Reuters contributed to this report.