Oil remains weak after disappointment over U.S. jobs data.
Oil prices came under renewed pressure on Monday, after Saudi Arabia cut prices for its Asian customers and demand worries lingered following last week's weaker-than-expected U.S. jobs data.
In electronic trading, West Texas intermediate crude for October delivery fell 82 cents, or 1.2%, to $68.47 a barrel, after closing down 1% to $69.29 a barrel on Friday. WTI prices rose 0.8% for the week. U.S. markets will be closed on Monday in observance of the Labor Day holiday.
Global benchmark Brent crude fell 83 cents, or 1.1%, to $71.76 a barrel. Brent declined 0.6% to $72.61 a barrel on Friday, but was up 1.3% for the week.
State oil company Saudi Aramco has cut its October official selling prices $(OSP.AU)$ for all grades delivering to Asia, while keeping prices unchanged for the U.S. and Europe. Arab Light crude for delivery to Asia was slashed to a premium of $1.70 per barrel from $3 in September, according to a company document. The price cuts were the first in four months for the region.
The Asian price cuts were bigger than expected, according to Jeffrey Halley, senior market analyst at OANDA. "Given that OPEC+ is continuing its plan to raise production monthly, despite weak data from China and the U.S. raising slowdown fears, and Saudi Arabia looking for market share in the region, oil is likely to remain under pressure," said Halley.
He said if Brent falls through its 100-day moving average $(DMA.AU)$ at $71.15 a barrel, the market could retest $70.50 and $70.00 a barrel, with things getting "ugly below $70.00 a barrel." WTI has already moved through its 100-DMA support at $68.60 on Monday, with $67 a barrel under threat, added Halley.
Last Wednesday, the Organization of the Petroleum Exporting Countries and its allies stuck to a plan to gradually increase production by 400,000 barrels a day per month from August. Analysts at Capital Markets have predicted that the decision could lead to a surplus in global supplies early 2022, and help drag Brent prices down 15% by the end of next year.
Friday's drop in oil prices followed a smaller-than-expected August climb in U.S. payrolls, which some are worried could crimp demand for crude. Still, a slow recovery for refiners in the hurricane hit Gulf of Mexico, left prices higher on the week. On Friday, Baker Hughes $(BKR)$ reported the biggest weekly drop in U.S. oil-drilling rigs for the year thus far, as producers struggle to come back online.