SINGAPORE- Oil prices dropped more than 1 percent on Monday after earlier hitting their lowest since July as Saudi Arabia made the deepest monthly price cuts for supply to Asia in five months while optimism about demand recovery cooled amid the coronavirus pandemic.
Brent crude was at $42.21 a barrel, down 45 cents or 1.1 percent, after earlier sliding to $41.51, the lowest since July 30.
US West Texas Intermediate crude skidded 51 cents, or 1.3 percent, to $39.26 a barrel after earlier dropping to $38.55, the lowest since July 10.
The world remains awash with crude and fuel despite supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and their allies, known as OPEC+, and government efforts to stimulate the global economy and oil demand. Refiners have reduced their fuel output as a result, causing oil producers such as Saudi Arabia to cut prices to offset the falling crude demand.
“Sentiment has turned sour and there might be some selling pressure ahead,” Howie Lee, an economist at Singapore’s OCBC bank said.
The Labor Day holiday on Monday marks the traditional end of the peak summer demand season in the United States and that renewed investors’ focus on the current lacklustre fuel demand in the world’s biggest oil user.