Earlier in the week, Aramco announced that it was lowering the price of its oil to Asia, sending oil prices into a tailspin.
Aramco influences oil prices
At 4:55 Paris time, the ICE Brent November oil contract was up $0.27/b (0.37%) at $72.49/b.
While the NYMEX WTI October contract was down $0.19/b (0.27%) at $69.10/b.
“Oil prices traded largely in consolidation as investors digested a series of push and pull factors. On the one hand, last week’s lackluster US jobs report and Saudi Arabia’s price cuts appear to be challenging the outlook for oil demand, while on the other, supply is constrained by the impact of Hurricane Ida, supporting oil prices in the near term,” Yeap Jun Rong, market strategist at IG, told S&P Global Platts on September 7.
Several analysts said that oil prices would be affected by Saudi Arabia’s price cuts for Asian buyers.
These cuts suggest uncertain demand prospects.
While cases of Covid-19 are still on the rise in many countries.
Aramco lowers prices in Asia
Aramco reduced October differentials against an Oman/Dubai basis for crude destined for Asia.
For super-light and light grades, by $1.30/b.
For extra-light grades, by $1.20/b.
And for medium and heavy grades, by $1/b compared with September 2021 levels.
These reductions were much larger than the monthly decline of $0.13 cents/b in the spread between the spot price and the price of Dubai futures paper in August 2021.
Prices hold steady
Despite slow demand growth in China, analysts said that expectations of increased domestic air travel were picking up, and that a growing number of Covid-19 vaccinations could support the oil market.
Meanwhile, damage to oil production facilities in the US Gulf of Mexico in the wake of Hurricane Ida continued to keep production largely halted, limiting the price decline.
Even so, on Sunday September 5, 2021, 88.3% of US Gulf crude production was still offline.
In addition, a weaker dollar could also support prices, according to Phillip Futures analysts.
