[Editor’s note: This story was updated at 3:08 p.m. CT Sept. 8.]
Oil futures settled sharply lower on Sept. 8, with Brent sinking below $40/bbl for the first time since June and U.S. crude falling nearly 8% after Saudi Arabia cut its October selling prices and COVID-19 cases rebounded in several countries.
Coronavirus infections are rising in India, Great Britain, Spain and several parts of the United States, where the infection rate has not come under control for months. The rebound in illnesses could weaken the global economic recovery and sap fuel demand.
U.S. WTI crude settled down $3.01 or 7.6%, at $36.76, earlier hitting lows not seen since June 15. Brent crude fell $2.23, or 5.3%, to $39.78/bbl.
Both oil benchmarks are below trading ranges that had persisted since August. Brent fell for a fifth day and has lost more than 10% since the end of August.
Labor Day weekend marked the end of U.S. summer driving season when gasoline demand is greatest, compounding both a supply and demand problem in the market, according to Bob Yawger, director of energy futures at Mizuho.
"With refiners dropping run rates in the coming weeks as turnaround season begins, crude storage is going to climb even higher than near historic highs," Yawger said.
An exodus of speculative net long positions on crude oil is exacerbating the selloff, he added.
"The speculative community is bailing at once and the herd mentality is destroying the price of oil," said Yawger.
On Sept. 7, crude fell after Saudi Arabia's state oil company Aramco cut the October official selling prices for its Arab light oil, a sign of softening demand.
"The Saudi price cuts announced Sunday made WTI unattractive to Asian buyers," said Colorado-based energy analyst Phil Verleger of PK Verleger LLC.
Still, oil has recovered from historic lows hit in April, thanks to a record supply cut by OPEC and allies, known as OPEC+. The producers are meeting on Sept. 17 to review the cuts.
U.S. oil rigs fell by one to 491 this week, while gas rigs rose four to 113, their highest since January 2020, according to the closely followed Baker Hughes report.
"This award reiterates GATE's position as the global leader in the energy transition,” Karthik Annadorai, executive vice president of GATE Energy, said.
The investment bank said key oil products markets are showing "steep backwardation and inventories that have fallen to low levels."