Oil slumps on signs of weakening demand from top buyer China

Oil slumps on signs of weakening demand from top buyer China

Oil is also under pressure as USA companies increased their drilling for new supply after the recent recovery in oil prices.

The world's top oil exporter Saudi Arabia cut the October official selling price for Arab Light crude it sells to Asia by the most since May, indicating demand remains weak.

But as always with the energy market, opinions differed: while Kemp and others regarded the rebalancing of the oil market as stalled, Russian president Vladimir Putin and Saudi king Mohammed bin Salman spoke by phone on Monday and agreed that the Organization of the Petroleum Exporting Countries' (OPEC) output cutbacks had generally stabilized global energy markets; they also vowed to continue coordination action.

President Donald Trump said that he intends to curb the us economic relationship with China, threatening to punish any American companies that create jobs overseas and forbid those that do business in China from winning federal contracts. Its oil price then fell by 50 cents from the benchmark used by Saudi Arabia.

Road fuels are the prime driver of the oil demand's recovery and it was a road fuel come-back that supported oil prices on the first place after the first months of the Covid crisis. Previous sell-offs in July and August were followed by quick rebounds so the US oil industry will likely choose to wait for additional clarity regarding oil's near-term trend.

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Oil was steady after closing at the lowest level since June amid a worsening short-term demand outlook and a further deterioration in the relationship between the world's two biggest economies.

However, the price cut is getting compounded by reports that Chinese Seaborne crude imports have fallen 5.4% in August to 10.9 million barrels per day, down from a record high as concerns also mount that China's storage capacity is nearing tank tops.

Brent crude () futures inched up 6 cents, or 0.1%, to $42.07 a barrel, after falling 1.5% on Monday.

Evidence of a pullback in China's demand for crude is that barrels loaded in August and destined for Chinese ports dropped to 7.93 million bpd, down from 8.2 million bpd in July and well down from the second quarter average of 11.87 million bpd, according to data from Refinitiv Oil Research.

These positions clear out are very much reflective of a market that got too far ahead of economic demand reality, which then ran headlong into the biggest seasonality roadblock of them all, the end of United States peak driving season compounded by a refinery maintenance period. Asia's refineries had bought a lot of oil after the fall in crude earlier this year.

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