Photo: Elizabeth Conley/Staff Photographer
Oil extended its retreat below $40 a barrel after Saudi Arabia cut pricing for October crude sales as demand stuck below pre-Covid levels.
Futures in New York dropped 1.7% after Saudi Aramco reduced its key Arab Light grade more than expected for shipments to Asia, a signal that fuel consumption in the largest oil-importing region is wavering. The company also lowered prices to the U.S. for the first time in six months.
The move compounded losses in the American West Texas Intermediate crude benchmark, which fell 7.5% last week as the virus crisis appeared to stage a comeback in parts of Europe, while cases in India surged. In China, crude imports fell for a second month in August, and will probably remain lower as independent refiners run out of quotas after a buying binge earlier this year.
“Prices were perhaps overdue a bit of a correction,” said Paul Horsnell, head of commodities research at Standard Chartered Bank. “The demand recovery coming in a bit flatter than early expectations has been one of the key themes in fundamental data over the past couple of months.”
The difference between Brent for December this year and next is now the biggest since May. That structure, known as contango, suggests traders continue to be concerned about the market outlook in the coming months. It’s a similar picture for WTI too.
Global oil demand may not get back to pre-virus levels for another two to three years, Russian Deputy Energy Minister Pavel Sorokin told the Rossiyskaya Gazeta newspaper. The nation’s president spoke with Saudi Arabia’s king, and both men were satisfied with OPEC+ compliance, the Kremlin said.