(Bloomberg) -- Oil extended its retreat below $40 a barrel, holding losses after Saudi Arabia reduced crude prices on an uncertain outlook for demand and as trade ties between the U.S. and China worsened.
Futures in New York dropped 1.5% from Friday’s close after Saudi Aramco (SE:2222) reduced pricing for October crude sales in Asia and the U.S. as demand remained stuck below pre-Covid levels. President Donald Trump said that he intends to curb the U.S. economic relationship with China, threatening to punish any American companies that create jobs overseas and to forbid those that do business in China from winning federal contracts.
The U.S. West Texas Intermediate crude benchmark fell 7.5% last week as the virus crisis appeared to stage a comeback in parts of Europe, while cases in India surged. In China, crude imports dropped for a second month in August, and will probably remain lower as independent refiners run out of quotas after a buying binge earlier this year.
The difference between Brent for December this year and next is now the biggest since May. That structure, known as contango, suggests traders continue to be concerned about the market outlook in the coming months. It’s a similar picture for WTI too.
Global oil demand may not get back to pre-virus levels for another two to three years, Russian Deputy Energy Minister Pavel Sorokin told the Rossiyskaya Gazeta newspaper. The nation’s president spoke with Saudi Arabia’s king, and both men were satisfied with OPEC+ compliance, the Kremlin said.
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