By Peter Nurse
Investing.com -- Crude oil prices sold off Monday after Saudi Arabia cut its pricing for oil sales in October, continuing recent weakness amid signs that global fuel demand is wavering.
By 7 AM ET (1100 GMT), U.S. crude futures were down 1.8% at $39.07 a barrel, while the global benchmark Brent was down 1.6% at $41.96 a barrel.
Saudi Aramco (SE:2222) slashed October prices of its Arab Light grade of crude oil for sale in Asia over the weekend, marking its biggest price cut since May in its largest regional market.
The move came - coincidentally - on the same day that new figures out of China showed the world's biggest importer scaling back its purchases in August after exploiting the collapse in prices earlier in the summer with heavy buying to fill its strategic storage.
“Data from China’s customs shows that crude oil imports into the country dropped 7.4% month-on-month to 47.5 million tons (11.2 million barrels/day) in August,” said analysts at ING, in a research note, “as demand for inventories slowed due to capacity constraints and price recovery.”
“China’s demand slowdown comes at a time when the OPEC+ group has been easing production cuts and increasing supplies,” ING added.
Additionally, the second wave of Covid-19 in Europe and the virus' continued spread through India, two other huge importers, is also weighing on prices.
U.S. crude retreated 7.5% last week, the biggest weekly loss since June, with the extended Labor Day holiday weekend symbolically bringing an end to what has been a sluggish summer driving season.
Even so, major losses are not likely as the global economy is probably not headed for any major slowdown due to Covid-19, Reuters reported Keisuke Sadamori, IEA director for energy markets and security, as saying.
"There is an enormous amount of uncertainty, but we don't expect any additional serious slowdown in the coming months," Sadamori said in an interview. "Even though (the market is) not expecting real robust growth coming back soon, the view on demand is more stable compared with three months ago."
The IEA cut its 2020 oil demand forecast in its monthly report on Aug. 13, citing the sustained low level of demand from the aviation industry, among other factors.