Oil falls by $1 after deep Saudi price cuts spur demand concerns

Oil prices fell about $1 on Monday, extending losses after the world's top exporter Saudi Arabia slashed crude contract prices for Asia over the weekend, reflecting well-supplied global markets and concerns over the outlook for demand.

Brent crude futures for November fell 98 cents, or 1.4 per cent, to $71.63 a barrel by 0613 GMT while US West Texas Intermediate crude for October was at $68.34 a barrel, down 95 cents, or 1.4 per cent.

State oil giant Saudi Aramco notified customers in a statement on Sunday that it will cut October official selling prices (OSPs) for all crude grades sold to Asia, its biggest buying region, by at least $1 a barrel. The price cuts were larger than expected, according to a Reuters poll among Asian refiners.

"The OSPs to Asia are bearish, signalling softer demand and potentially higher supply," Energy Aspects analyst Virendra Chauhan said.

Global oil supplies are increasing as the Organization of the Petroleum Exporting Countries and their allies, a grouping known as OPEC+, is raising output by 400,000 barrels per day a month between August and December.

"Given that OPEC+ is continuing its plan to raise production monthly, despite weak data from China and the US raising slowdown fears, and Saudi Arabia looking for market share in the region, oil is likely to remain under pressure," said Jeffrey Halley, a senior market analyst for Asia Pacific at brokerage OANDA.

The decline in crude futures added to falls on Friday after a weaker than expected US jobs report indicated a patchy economic recovery that could mean slower fuel demand during a resurgent pandemic.

Losses were capped by concerns that US supply would remain limited in the wake of Hurricane Ida.

The US government is releasing crude from strategic petroleum reserves as production in the US Gulf Coast struggled to recover. Some 1.7 million barrels of oil and 1.99 billion cubic feet natural gas output remained offline, government data released on Friday showed, while power shortages are preventing some refineries from resuming operations.

The hurricane also led US energy firms to cut last week the number of oil and natural gas rigs operating for the first time in five weeks, data from Baker Hughes showed on Friday. The oil rig count alone fell the most since June 2020.