Oil Down After Saudi Price Cuts

An employee uses binoculars to look out towards the Arabian Sea in the Port Control Center at Saudi Aramco's Ras Tanura oil refinery and terminal in Ras Tanura Saudi Arabia on Monday Oct. 1 2018. Saudi Aramco aims to become a global refiner and

An employee uses binoculars to look out towards the Arabian Sea in the Port Control Center at Saudi Aramco's Ras Tanura oil refinery and terminal in Ras Tanura Saudi Arabia on Monday Oct. 1 2018. Saudi Aramco aims to become a global refiner and

Oil is also under pressure as US companies increased their drilling for new supply after the recent recovery in oil prices.

The boost in prices was eased with low oil consumption in Asia, Europe and North America with the ending of the summer driving season, indicating that global oil demand would decrease.

In point of fact, Friday's tottering of crude oil futures' prices appeared to be catalysed by an extended retreat in the U.S. equity market, while a United States private payroll report revealing a sluggishness in labour market had pressured the oil prices further despite a maverick upturn in USA manufacturing activity alongside factory goods orders.

The world's top oil exporter, Saudi Arabia, cut the October official selling price for Arab Light crude it sells to Asia by the biggest margin since May. It also lowered pricing for USA buyers.

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It remains to be seen whether the number of US oil rigs will stay above 180 in the light of recent oil price action. This is the first price cut for the USA since April. Chinese crude imports fell for a second month in August, and the world's biggest importer is expected to purchase much less in September and October than it did in May and June as independent refiners run out of quota after a buying binge earlier this year.

The Organisation of the Petroleum Exporting Countries (OPEC) and its allies including Russian Federation, a group known as OPEC+, eased production cuts from August to 7.7 million barrels per day after global oil prices improved from historic coronavirus-linked lows. After this, the price of crude recovered and the benchmark Brent crude jumped twice more than its low level after March. After that, the market is likely to go looking towards the $35 level.

For the week, the USA crude futures had shrugged off 7.4 per cent, while the Brent crude futures' prices had fallen by 5.3 per cent.

Vijay Valecha, chief investment officer, Century Financial said benchmarks suffered one of their worst weekly corrections over the last two-month period with WTI October & Brent November down by eight per cent. While infection rates in the USA are slowing, the pandemic appears to be staging a comeback in parts of Europe and cases in India are still surging. More than 90 thousand people are getting infected daily in India. Asia's refineries had bought a lot of oil after the fall in crude earlier this year.

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