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Saudi Arabia's price cut raises concerns about demand outlook, U.S. oil falls below the US$69 mark
On September 6, U.S. oil futures fell by US$0.4 to settle at US$68.89 per barrel; Saudi Aramco notified customers in a statement on Sunday that it would lower the October official selling price (OSP) of all crude oil grades by at least 1 per barrel. The U.S. dollar has aroused market concerns about the prospects for demand. At the same time, Saudi Arabia’s move to lower prices for Asian buyers has increased the possibility of fierce competition among oil-producing countries, and oil prices have been under pressure.
Monday (September 6) US oil futures fell 0.4 US dollars, or 0.6%, and settled at 68.89 US dollars per barrel; Bulk oil fell 0.39 US dollars, or 0.54%, to 72.22 US dollars per barrel. Saudi Aramco informed customers in a statement on Sunday that it will lower the October official selling price (OSP) of all crude oil grades by at least $1 per barrel, which has raised concerns about the demand outlook and Saudi Arabia has cut prices for Asian buyers. The move made the possibility of fierce competition among oil-producing countries higher and lower oil prices.
Only a few days after OPEC+ maintained its decision to increase production, Saudi Arabia lowered its oil prices in Asia next month. The Saudi move caught traders off guard, who believed that Saudi Arabia aimed to intensify competition and retain market share. According to a survey of Asian refineries, the price cuts are greater than expected.
Ole Hansen, Head of Commodity Strategy at Saxo Bank A/S, said, “Saudi Arabia’s price cuts in Asia have exceeded expectations. Investors are speculating whether they are gaining market share, or whether they have implemented price cuts in order to maintain competitiveness because they foresee weak demand.”
Bjornar Tonhaugen, head of crude oil markets at Rystad Energy, said: “When the Saudi giant lowered its sales prices to Asia in October, it indicated a slight shift in the relationship between supply and demand, and traders had to follow this path today.”
With the Organization of the Petroleum Exporting Countries and its allies (ie OPEC+) increasing production by 400,000 barrels per day from August to December, global oil supply is increasing. Senior market analyst Jeffrey Halle said: "Given the weak US data has triggered concerns about economic slowdown, Saudi Arabia is seeking market share in the region. OPEC+ continues its monthly increase in production plan, and oil may still face pressure."
According to data from the US Bureau of Security and Environmental Enforcement (BSEE), as of September 6, the Gulf of Mexico area closed 83.87% of crude oil production (or 1.53 million barrels per day) and 80.78% of natural gas production (or 1801.42 million cubic meters). Feet/day). After Hurricane Ada, a total of 99 oil and natural gas production platforms are still evacuated. As production on the Gulf Coast of the United States is difficult to recover, the U.S. government is releasing crude oil from the Strategic Petroleum Reserve.
According to data released by Baker Hughes on Friday, the hurricane also caused US energy companies to reduce the number of oil and gas rigs operating for the first time in nearly five weeks. The decline in the number of oil rigs last week was the largest since June 2020.
(U.S. Oil Hour Chart)
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