Oil falls as Saudi Arabia cuts crude prices amid weak China demand; US output struggles

Crude oil prices started the week under pressure as Saudi Arabia cut official selling prices for April loadings, while poor economic data from China weighed on sentiments. 

While there was a brief rally towards the end of last week that pushed prices back above the $70 per barrel threshold, this upward momentum has not been sustained, and prices have once again begun to decline.

“Tariff uncertainty is a key driver behind the weakness,” analysts at ING Group, said in a note. 

At the time of writing, the price of West Texas Intermediate crude oil on the New York Mercantile Exchange was at $67.02 per barrel, slightly down from the previous close. 

Brent crude oil on the Intercontinental Exchange was at $70.38 a barrel, flat from Friday’s close. 

The price of WTI crude oil experienced a significant decline for seven consecutive weeks, marking the longest period of sustained losses since November 2023. 

This downward trend coincided with a three-week decline in Brent crude oil prices. 

These market fluctuations occurred in the wake of a series of policy decisions by US President Donald Trump, including the imposition and subsequent delay of tariffs on crucial oil suppliers Canada and Mexico, coupled with increased taxes on Chinese goods.

The tariffs on Canada and Mexico, key players in the North American energy market, introduced uncertainty and potential disruptions to the oil supply chain, contributing to the downward pressure on WTI and Brent prices. 

Simultaneously, the heightened taxes on Chinese goods escalated trade tensions between the US and China, two of the world's largest economies.

Poor economic data

The recent release of Chinese inflation data over the weekend, which revealed a 0.7% year-on-year decline in consumer prices for February, has further solidified the bearish sentiment among speculators in the oil market. 

This decline in consumer prices suggests a weakening demand in the Chinese economy, which is a major consumer of oil. 

As a result, traders anticipate a decrease in oil demand, leading to lower oil prices. 

“Positioning data shows speculators reduced their net longs in ICE Brent by 61,121 lots over the last reporting week to 159,425 lots as of last Tuesday -- the smallest position since December,” ING analysts said. 

David Morrison, senior market analyst at Trade Nation said:

Moreover, China's crude oil imports fell 3.4% year-on-year in the first two months of 2025, totalling 83.85 million tonnes. 

This equates to around 10.4 million barrels per day, down from roughly 11.3 million barrels per day in December and below the 10.4 million barrels per day average for January and February 2024, according to ING. 

Saudi price cut

Saudi Arabia, a major player in the global oil market, has announced its official selling prices (OSPs) for crude oil shipments scheduled for April. 

The latest announcement reveals a reduction in prices across almost all regions, signaling a potential shift in the kingdom's oil pricing strategy.

However, it's worth noting that the OSPs for crude oil exports to the United States remained unchanged. 

Concerns about market balance and uncertain demand have led to a $0.40 per barrel decrease in the flagship Arab Light crude into Asia, now priced at $3.50 per barrel over the benchmark, according to ING. 

This comes as OPEC+ is set to increase supply. T

he Organization of the Petroleum Exporting Countries and allies are scheduled to raise oil output by 140,000 barrels per day from April, which will see them unwind some of the 2.2 million barrels a day voluntary production cut. 

US producers' dilemma

The US Energy Information Administration will release its Short Term Energy Outlook on Tuesday, a relatively data-heavy week for the energy calendar. 

The outlook will include the EIA’s latest assessment of the global balance and US oil and gas production forecasts. 

Last month, the EIA forecasted US crude oil production growth of approximately 380,000 barrels per day on a year-on-year basis in 2025 and 140,000 barrels a day in 2026.

“Recent price weakness poses downside risks to these numbers,” ING Group said. 

Morrison added: