Oil Down Again On Demand Fears Generated by Saudi Arabia

But one analyst still views demand recovery as steady, despite hiccups: File Image/Pixabay

Despite extremely strong demand figures for crude across Europe and the U.S., traders on Tuesday chose to fixate on signs of tepid demand in Asia due to renewed Covid lockdowns, and as a result two key benchmarks continued their downward price spiral.

Specifically, they viewed Saudi Arabia cutting the price for all crude grades sold to Asia by at least $1 per barrel as proof of weak demand, and accordingly Brent settled down 53 cents at $71.69 per barrel.

West Texas Intermediate settled down 94 cents at $68.35 per barrel.

Crude prices were also pressured by data showing the U.S. economy in August created the fewest jobs in seven months; however, the losses were capped by reports that China's oil imports rose 8 percent in August from a month earlier and its exports unexpectedly grew at a faster pace for that same month.

Still, Samy Chaar, chief economist at Banque Lombard & Cie, told Bloomberg television that the biggest uncertainty in the oil sector is still demand, due to the Delta variant, the notion of Iran re-entering the world market, and the winding down of the peak travel season, among other factors.

However, he acknowledged that demand in the U.S. and across Europe is acceptable and indicates the overall demand recovery continues to improve.

In other oil-related news on Tuesday, an estimated 17.5 million barrels of oil have been lost to the market due to Hurricane Ida, and analysts think that Ida could ultimately reduce total U.S. production by 20 million to 30 million barrels.

Krista Kuhl, a consultant at Facts Global Energy, said, "There could be volumes that are offline for a considerable amount of time, it's just too early to tell."

Royal Dutch Shell said it's returning staff to its Auger and Enchilada/Salsa oil and natural gas platforms in the Gulf of Mexico, though those assets and others remain shut.