Oil futures drifted lower Tuesday, with Brent crude building on weakness seen the previous session after Saudi Arabia slashed crude prices for Asia.
The weaker tone comes as crude erased a bounce that followed unexpectedly strong Chinese trade data.
West Texas Intermediate crude for October delivery
fell 84 cents, or 1.2%, to $68.45 a barrel on the New York Mercantile Exchange. U.S. markets were closed Monday for the Labor Day holiday.
November Brent crude
the global benchmark, was off 33 cents, or 0.5%, at $71.89 a barrel on ICE Futures Europe.
Brent fell Monday after Saudi Arabia’s state oil company Saudi Aramco cut its October official selling prices (OSP) for all grades delivering to Asia, while keeping prices unchanged for the U.S. and Europe. Arab light crude for delivery to Asia was slashed to a premium of $1.70 per barrel from $3 in September, according to a company document. The price cuts were the first in four months for the region.
Oil was lifted in earlier trade after China data showed the country imported 44.5 million tons of crude oil in August, noted Carsten Fritsch, analyst at Commerzbank, in a report. That works out to daily imports of 10.5 million barrels, an 8% rise from July and the first time above the 10-million-barrel-a-day threshold in five months. The rise comes as China set a somewhat more generous import quota.
August imports were still down 6% year over year, he noted, with China importing 5.7% less crude over the first eight months of the year than in the same stretch in 2020.
“The question for the market is whether this trend in China’s crude imports will continue upwards in the ensuing months. That is a complicated matter which the market is trying to get right, as it also depends on government policies on quotas and use of strategic reserves,” said Bjørnar Tonhaugen, head of oil markets at Rystad Energy, in a note.
“For now, the Asian market is in a ‘semi-bullish mode’ while awaiting new clues on the recovery of U.S. production and refinery activity after the hit of Hurricane Ida,” he wrote.
The Bureau of Safety and Environmental Enforcement late Monday estimated nearly 84% of oil production in the Gulf of Mexico remained shut in a week after the storm, while 80.8% of natural-gas production remained closed.
Refineries in the Gulf Coast region have started to reopen, according to news reports, though several remain closed.