Oil demand and supply has experienced massive changes over the past months due to the ongoing coronavirus pandemic. Although global demand and supply for oil is being anticipated to improve, oil prices are still changing and not having a stable ground and this has become somehow worrisome to investors and oil producing countries.
As of today, 7th September, oil prices have fallen as Saudi Arabia made the deepest monthly price cuts for supply to Asia in five months and uncertainty over China’s oil demand cloud oil markets’ recovery.
Brent crude was trading at $42.04 a barrel, but has declined to $41.51(62 cents or 1.4%) the lowest since July 30.
U.S. West Texas Intermediate crude also moved from $39.14 a barrel to $38.55 (63 cents, or 1.6%), it the lowest since July 10.
The world’s top oil exporter Saudi Arabia, has cut the planned official October selling price of Arab Light crude it sells to Asia by the most since May, indicating that due to the ongoing pandemic demand remains weak. Asia is Saudi Arabia’s largest market by region.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, known as OPEC+, also eased production cuts from August to 7.7 million barrels per day after global oil prices improved from historic coronavirus-linked lows.
The world remained awash with crude and fuel supplies despite OPEC+ supply cuts and various government efforts to stimulate the global economy and oil demand, forcing refiners to rein in output and producers to make deep price cuts again.
With the Labour Day which is a holiday in the U.S. officially marking the end of the summer driving season, investors are also facing up to the fact that demand has lacked vitality while inventories remain at elevated levels.
According to data reports, China, the world’s biggest oil importer which has been supporting prices with record purchases, slowed its intake in August and increased its products exports.
Keisuke Sadamori, Director for energy markets and security at the International Energy Agency commenting on the situation said there are many uncertainties with the Chinese economy.
“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.”
Oil is also under pressure as U.S. companies increased their drilling for new supply after the recent recovery in oil prices.
U.S. energy firms last week added oil and natural gas rigs for the second time in the past three weeks, increasing the previous 244 rigs to 256 rigs.
