The drop is coming after Saudi Arabia made the deepest monthly price cuts for supply to Asia in five months as optimism about demand recovery cooled amid the coronavirus pandemic. Breaking down below there could open up the door to much lower pricing.
Brent crude was at $41.75 a barrel, down 91 cents or 2.1 per cent by 0000 GMT, after it earlier slid to $41.51, its lowest since July 30.
A price correction is overdue and weakening margins for major fuels such as diesel may potentially become a concern, said Howie Lee, an economist at Oversea-Chinese Banking Corp.in Singapore. "Yet the slowdown is now starting to be more evident than ever and these two first weeks of September are weeks of sobering up to the reality", he said.More news: Fati becomes Spain's youngest goalscorer, breaks 95-year record
The world remained awash with crude and fuel supplies despite OPEC+ supply cuts and government efforts to stimulate the global economy and oil demand, forcing refiners to rein in output and producers to make deep price cuts again. I believe that we are more likely see rallies show signs of exhaustion that people will fade until we reach down towards the $40 level underneath. Last week, it recorded its biggest weekly decline for nearly three months.
"The mood has turned somewhat pessimistic in the second half of last week and the immediate risk is skewed to the downside", said oil broker PVM's Tamas Varga.
China, the world's largest oil importer that has supported prices with record purchases, slowed intake in August and increased product exports, according to customs data on Monday.More news: Luis Suarez agrees deal to join Juventus
The Saudis cutting their crude by the most since May and China's shift to exports caused Keisuke Sadamori, director for energy markets and security at the International Energy Agency, to remark, "There are so many uncertainties with regard to the Chinese economy and their relationship with key industrialized countries, with the USA and these days, even Europe".
On Friday, both United States and UK crude futures had taken a heavy header of more than 3 per cent and had marked up their worst weekly percentage decline since June, as frets over a steep lag in economic recovery from the pandemic induced fiscal slump had rekindled investors' worries about a weakening global oil demand.
Starting with the USA, worries about the health of road fuel demand intensified this morning, with Labor Day holiday marking the end of the summer driving season. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article.More news: Scotland's Clarke wary of Czech second-string in Nations League