Oil steady as Ida outages offset Saudi price cuts

LONDON (Reuters) – Oil prices were little changed on Monday as gains on production outages after Hurricane Ida were tempered by Saudi Arabia’s sharp cuts to crude contract prices for Asia, reviving concerns over the demand outlook.

FILE PHOTO: General view of Aramco tanks and oil pipe at Saudi Aramco’s Ras Tanura oil refinery and oil terminal in Saudi Arabia May 21, 2018. REUTERS/Ahmed Jadallah/File Photo

Brent crude futures for November were up 3 cents, or 0.04%, at $72.64 a barrel by 1354 GMT. U.S. West Texas Intermediate crude for October was up 4 cents, or 0.06%, at $69.33.

Both contracts had been down more than $1 in earlier trade.

State oil group Saudi Aramco notified customers in a statement on Sunday that it will cut October official selling prices (OSPs) for all crude grades sold to Asia, its biggest buying region, by at least $1 a barrel.

The price cuts were larger than expected, based on a Reuters poll of Asian refiners.

“The cut in Saudi OSPs to Asia provided brief downside pressure this morning, which the market is recovering from,” said Tamas Varga at PVM Oil Associates.

The monthly Energy Information Administration report due Wednesday will be eagerly watched, said Varga, adding that solid demand estimates for the balance of this year and 2022 could lift oil prices towards their July highs.

Global oil supplies are increasing as the Organization of the Petroleum Exporting Countries and its allies, a grouping known as OPEC+, are raising output by 400,000 barrels per day (bpd) each month between August and December.

“Given that OPEC+ is continuing its plan to raise production monthly, despite weak data from China and the U.S. raising slowdown fears and Saudi Arabia looking for market share in the region, oil is likely to remain under pressure,” said Jeffrey Halley, senior market analyst for Asia Pacific at brokerage OANDA.

The earlier decline in crude futures added to falls on Friday after a weaker than expected U.S. jobs report indicated a patchy economic recovery that could mean slower fuel demand during a resurgent pandemic.

Losses were capped by concerns that U.S. supply would remain limited in the wake of Hurricane Ida.

The U.S. government is releasing crude from strategic petroleum reserves as production in the U.S. Gulf Coast struggles to recover.

Some 1.7 million barrels of oil and 1.99 billion cubic feet of natural gas output remained offline, government data showed on Friday, while power shortages are preventing some refineries from resuming operations.

The hurricane also led U.S. energy companies to cut the number of oil and natural gas rigs operating for the first time in five weeks, data from Baker Hughes showed on Friday. The oil rig count last week fell the most since June 2020.

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