Oil extends losses as Saudi Arabia slashes Asian crude prices

The October price for Saudi's flagship crude was cut by US$1.30.
The October price for Saudi's flagship crude was cut by US$1.30.PHOTO: AFP/ARAMCO

NEW YORK (BLOOMBERG) - Oil extended losses at the open after Saudi Arabia slashed crude prices for Asian buyers by a larger-than-expected margin just days after Opec+ agreed to continue raising production.

Futures in New York edged below US$69 a barrel after falling 1 per cent on Friday. The October price for Saudi's flagship crude was cut by US$1.30, more than double the forecast reduction.

Traders were surprised by the move, attributing it to factors including arbitrage inflows and competition to retain market share.

After rallying in the first half of this year, crude's surge has stalled as the market weighed both bearish and bullish signals.

New Covid-19 variants and the readiness of governments to release strategic reserves weighed on investor sentiment, even as a decline in global crude inventories and record-high United States fuel consumption added to optimism.

Asian buyers will need to submit their requests for October volumes by Sept 6. Saudi official prices for cargo sales to the US, North-west Europe and the Mediterranean were stable or little changed, pointing to the producer's intent on prioritising oil flows to Asia.

Last month, some Asian customers requested less Saudi volumes as the Delta variant prompted the return of movement restrictions. Still, the Organisation of Petroleum Exporting Countries (Opec) and its allies expect global oil markets will continue to tighten this year even as they revive output, before flipping into surplus again next year.

Separately, traders are closely watching for the return of oil production and refineries affected by Hurricane Ida. The US granted a second refiner in Louisiana access to the country's emergency crude stockpiles as most oil-producing platforms in the Gulf of Mexico remain offline.