By Gina Lee
Investing.com – Oil was down on Monday morning Asia, with investors reacting to Saudi Arabia’s massive price cuts for supply to Asia.
Brent oil futures edged down 0.12% to $42.29 by 9:54 PM ET (2:54 AM GMT) and WTI futures slid 1.01% to $39.37, falling below the $40-mark.
The kingdom’s Saudi Aramco (SE:2222) slashed October prices of its Arab Light grade of crude oil for sale in Asia over the weekend. Saudi Arabia made its biggest price cuts since May in its largest market by region, as fuel demand recovery hopes fade in one of the world’s top oil exporters over the still-ongoing COVID-19 pandemic.
The number of global COVID-19 cases continues to rise, with almost 27 million cases as of September 7, according to Johns Hopkins University data.
The slow recovery in fuel demand continues to fuel fears of an oversupply, despite the American Petroleum Institute (API) and the U.S. Energy Information Administration (EIA) both reporting a large draw on crude oil supply the week before.
Oversupply fears have prompted attempts to address the situation, such as OPEC+ production cuts, which eased to 7.7 million barrels per day (bpd) from August but remain in place until December, and government efforts to stimulate economic recovery from COVID-19, with the abundant supply leading refiners to limit output and producers to cut prices.
Some investors also sounded a cautious note, as the Labor Day holiday in the U.S. signaling the end of the driving season in the country.
“With the Labour Day (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 been lacklustre, while inventories remain at elevated levels,” ANZ analysts warned in a note.