The Saudis are lowering oil prices yet again. WTI under 39 dollars
The fall of oil prices that we have witnessed during the end of the past week has grown even more intense starting the new week with pretty much the same results. The oil prices keep on falling due to lower demand for oil derivatives, unstable supply, and also due to further oil price discounts that have been offered by OPEC leader to Asian buyers (which is the key market). Similar behavior on the Saudi side led to the oil price war during March and we all know what it meant for oil prices.
Slower demand recovery
Because the fall in oil demand has been massive since the beginning of the pandemic, the OPEC together with Russia decided for strict production cuts. However, these shouldn’t be so severe and the market supply should gradually adjust to market demand. Be it as it may, the data from the US market from the last week indicate that the market demand recovery process might be more arduous than previously expected. Lower gasoline demand and pressure for lower prices might be one of these indications. Another pressure for oil prices is the fact that Iraq asked for an extension to meet the OPEC+ quotas. But problems arise also on the supplier’s side where OPEC+ has lowered cuts to 7,7 million barrels during August. Bigger extraction activity can be observed also in the US.