By Barani Krishnan
Investing.com - Two weeks on and oil bulls are swimming against the bearish tide since the Saudi attack. The kingdom’s assurance that its crude output was undamaged and that it will not strike at Iran drove prices down by another 1% or more on Monday.
U.S. West Texas Intermediate crude settled down $1.84, or 3.3%, at $54.07 per barrel.
U.K. Brent oil settled down $1.79, or 2.9%, at $59.25.
“Crude oil has closed the gap after the attack on Saudi Arabia,” said Olivier Jakob of oil risk consultancy PetroMatrix.
After surging as much as $8 per barrel initially, both WTI and Brent fell in a slow but persistent slide over the past two weeks as Saudi Arabia said its production had recovered fully from the Sept. 14 attack. It also said it had a higher output capacity now than before.
On Monday, WTI settled 75 cents below its pre-attack price of $54.85. Brent was nearly $1 below its earlier level of $60.22.
While buying on dips prevented an acceleration of last week’s selling, it’s “not enough to reverse the trend,” Jakob said.
The lack of any military response by Saudi Arabia toward Iran, which it has accused of the attack, has also erased any war premium from oil prices.
Saudi Arabia's Crown Prince Mohammed bin Salman warned in an interview broadcast with CBS on Sunday that oil prices could spike to "unimaginably high numbers" if the world does not come together to deter Iran. But he added that he would prefer a political solution to a military one.
Moving on from the Saudi saga, a week-long holiday in China to celebrate the Golden Week is expected to keep the lid on market positives this week.
Adding to that is a subdued Chinese economic outlook, despite a rebound in manufacturing.
Chinese Vice Premier Liu He is expected to travel to the U.S. next week to resume trade talks, but markets aren’t holding out too much hope, given President Donald Trump’s vacillations so far over the negotiations.
Tame inflation data from Germany, as well as the second-lowest Chicago PMI reading in four years is also keeping the macro tone in oil subdued.
Hedge funds and other money managers sold 16 million barrels of futures and options in the six major petroleum contracts in the week to Sept. 24, after buying a total of 144 million in the previous two weeks, according to Reuters columnist John Kemp.