Oil tumbles for 4th day as the world’s biggest exporter slashes prices, and investors turn increasingly bearish on the demand outlook

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Beawiharta Beawiharta/Reuters

Summary List Placement

  • Oil futures fell on Monday, in their longest slide since April, as Saudi Arabia made deep price cuts for Asia-bound crude to help stir demand.
  • COVID-19 vaccine contender Moderna said it would slow down its trial enrollment to ensure sufficient representation of minorities more at risk of contracting the virus.
  • Money managers have turned increasingly bearish on energy contracts in the week to September 1, according to data from Saxo Group.
  • Among energy contracts, Brent crude and New York Harbor diesel oil led net selling positions by money managers until the start of September.
  • Visit Business Insider’s homepage for more stories.

Oil prices tumbled to their lowest since late July on Monday, as Saudi Arabia cut prices for sales of its crude to Asia to counter slower demand among some of the world’s biggest consumers, such as China.

The world’s biggest exporter cut prices for a second consecutive month to help increase demand for its crude oil.  

US benchmark West Texas Intermediate dropped 1.4% to $39 in morning European trading and global benchmark Brent crude fell 1.4% to $42- down for a fourth straight day in its longest slide since April’s historic price crash. 

State oil producer Saudi Aramco cut its October official selling price (OSP) for shipments to Asia by $1.40 per barrel to a discount of 50 cents a barrel against the Middle East regional crude benchmark.

Aramco cut prices to Europe by 20 cents and those to the US by 60 cents, which Carsten Fritsch, an oil analyst at Commerzbank, said could be interpreted as a sign of weak demand. 

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In an environment of investors anxiously awaiting a COVID-19 vaccine, US biotech firm Moderna said it would slow down its vaccine trial enrollment to ensure adequate representation of minorities who are more at risk of contracting the virus. 

“Oil prices did not like the latest vaccine news as Moderna says it’s slowing the newest trial to ensure diversity,” said Stephen Innes, chief global market strategist, at Axitrader. 

Weekly data from the US Commodity Futures Trading Commission showed fund managers have cut their bullish bets on the energy complex in the latest week.

Brent crude and US diesel oil saw the most selling by money managers in the week to September 1, according to Saxo Bank. 

“Crude oil’s failure during the past month to break higher despite several price friendly developments had increasingly left the sector exposed to profit taking,” wrote Ole Hansen, head of commodity strategy at Saxo Bank.

The US Labor Day holiday signaled the beginning of a low demand period, a risk of rising stock piles, and a widening contango, he said, implying investors are worried about the supply-demand balance.

“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,” said Jeffrey Halley, a senior market analyst at OANDA. 

Halley said he now expected “massive falls,” but with signs of global recovery likely to increase, both Brent and WTI crude should find some stability at lower levels.

A structural rally in oil prices may only occur if the dynamics that led to the price drops adjust materially, he said.

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