WASHINGTON (DTN) -- At the beginning of a holiday-shortened week in the United States, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange fell in early trade Tuesday after Saudi Aramco sharply cut official selling prices for crude contracts to Asian and European buyers, reviving concerns over laggard demand growth in major oil consuming countries.
State oil giant Saudi Aramco said on Sunday that it will reduce October OSPs for all crude grades sold to Asia, its biggest buying region, by at least $1 a barrel (bbl). Documents detail that the cuts were much deeper than the $0.13 bbl month-on-month decline in the Dubai futures cash/paper spread in August, which is said to be a key element in OSP calculations. Saudi's move on its crude selling price comes on the heels of an agreement among Organization of the Petroleum Exporting Countries and Russia-led partners announced Sept. 2 that they would continue with a 400,000 barrels per day (bpd) production hike in October. OPEC+ agreed in July to increase their production 400,000 bpd monthly until the 9.7 million bpd in output cuts made in April 2020 are restored, meeting monthly to affirm or adjust the policy should market conditions change.
Domestically, Goldman Sachs trimmed its 2021 U.S. gross domestic product growth forecast by 30 basis points to 5.7% in the wake of both the August jobs report and a series of data releases that could suggest slower growth in the months ahead. Last month's employment report showed 235,000 new jobs were added by U.S. employers, a sudden deceleration from an upwardly revised 1.053 million in new jobs in July, suggesting a more muted pace of recovery over the final months of the year as the impact of government stimulus fades and the rate of infections of the Delta coronavirus variant continue to surge.
In China, the Caixin/Markit services Purchasing Managers' Index fell to 46.7 in August from 54.9 in July, its sharpest contraction in 16 months, while eurozone retail sales in July also dipped 2.3% month on month.
News late last week that the damage from Hurricane Ida to Port Fourchon, which sits at the southeast tip of Louisiana, was less than initially assessed joined a disappointing reading on the domestic labor market to send oil contracts lower. Port Fourchon and the Port of Houma reopened with restrictions, with Port Fourchon in particularly critical for offshore oil producers as it serves as a key transportation artery in delivering oil onshore. Analysts estimate about 90% of Gulf of Mexico oil production goes through the port.
As of Friday afternoon, about 1.7 million bpd or 93% of current oil production in the Gulf of Mexico remained shut-in following Hurricane Ida, with 133 offshore oil platforms out of 560 evacuated. According to Baker Hughes, the number of operating oil-directed drilling rigs in the United States fell 16 to a 394 four-week low Tuesday from a week ago, with the weekly decline the most since early June 2020.
Three of the nine refineries knocked offline by Hurricane Ida were last reported in restart including ExxonMobil's 520,000 bpd Baton Rouge refinery, with the refiner on Sept. 2 securing 1.5 million bbl of crude oil from the Strategic Petroleum Reserve. Marathon's 578,000 bpd Garyville refinery, Louisiana's largest, is in restart, as is Placid Oil's 75,000 bpd Port Allen refinery.
Near 7:30 a.m. ET, the NYMEX October West Texas Intermediate contract declined $0.86 to trade at $68.43 bbl, and Brent crude for November delivery slipped below $72 bbl. NYMEX October RBOB futures declined 1.99 cents to $2.1341 gallon, and front-month ULSD futures fell 2.78 cents to $2.1316 gallon.
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