Global oil prices dropped as market optimism about fuel demand recovery weakened amid the Covid-19 pandemic.
Brent crude LCOc1 dropped $0.45 to trade at $42.21 a barrel while the US West Texas Intermediate crude CLc1 fell $0.51 to settle at $39.26 per barrel, Reuters reported.
This comes after Saudi Arabia decided to cut prices for Asian supplies due to tepid fuel demand.
The market continues to be oversupplied despite supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and other participants such as OPEC+, as well as government efforts to revive the economy.
Last month, OPEC+’s production cuts amounted to 7.7 million barrels per day.
Singapore’s OCBC bank economist Howie Lee was quoted by the news agency as saying: “Sentiment has turned sour and there might be some selling pressure ahead.”
The oil prices are also under pressure after customs data revealed that China, the biggest oil importer in the world, slowed its intake last month.
US companies have also increased drilling activities, which further added pressure to the oil prices.
In the week that ended on 4 September, the oil and gas rig count in the US increased by two to 256.
The peak summer oil demand season in the US also ends with the Labor Day holiday today.
OANDA’s senior market analyst Jeffrey Halley was quoted by Reuters as saying: “Abundant supplies, fears of loosening OPEC+ compliance, the end of the US driving season and stale long positioning have all combined to erode confidence in oil.”