Futures Movers: Oil prices close 6% lower to start the week as Saudis lower prices, China exports slump

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Crude tracked a selloff in global assets on Monday, with the commodity pressured as Saudi Arabia cut prices for Asian customers and elsewhere, China reported sharply weaker export data.

A steep slide for stocks appeared to fan additional selling, analysts said.

Price action

West Texas Intermediate crude for June delivery
CL.1,
-6.36%

CL00,
-6.36%

CLM22,
-6.36%

fell $7.12, or 6.5%, to $102.64 a barrel. The contract rose 1.4% to close at $109.77 a barrel on the New York Mercantile Exchange last Friday, for a 4.9% weekly gain.

July Brent crude 
BRN00,
-6.09%

BRNN22,
-6.09%
,
the global benchmark, dropped $7, or 6.2%, to $105.39 a barrel. The contract ended up 1.3% to $112.39 a barrel on ICE Futures Europe Friday, a 4.9% gain for the week.

June natural-gas futures 
NGM22,
-10.95%

tumbled 12% to $71.62 per million British thermal units.

June gasoline 
RBM22,
-2.50%

fell 3.2% to $3.6392 a gallon, while June heating oil 
HOM22,
-2.15%

dropped 2.6% to $3.8452 a gallon.

Market drivers

Saudi Arabian oil company Saudi Aramco said Sunday that it reduced oil prices of all types of crude for Europe, Asia, Europe and the Mediterranean for June. The biggest cuts were seen in the Mediterranean. U.S. prices were unchanged.

Asian consumers will need to pay a premium of $4.40 per barrel for Arab Light, following a premium in May that hit a record high of $9.35, noted Carsten Fritsch, analyst at Commerzbank, in a note to clients.

“Apart from the particularly high OSP beforehand, one reason why Saudi Arabia is willing to make such high price concessions to its Asian consumers may be concerns about a loss of market shares. Russian Urals type oil is still trading at a very substantial discount of $24.5 vis-à-vis Brent, which makes it attractive to those Asian consumers who have not signed up to the West’s sanctions against Russia,” said Fritsch.

Losses for crude deepened as equity markets tumbled, with the Dow Jones Industrial Average
DJIA,
-1.34%

down around 650 points at its session low, while the S&P 500
SPX,
-2.56%

slumped 2.7% after trading at its lowest since April 2021.

The markets brushed aside news that G-7 countries agreed on the weekend on a gradual import ban for Russian oil, as that country’s forces continued to bear down on Ukraine.

Meanwhile, the market was reminded of China’s fragile economy to start the week, after data showed exports rose just 3.9% on year in April, after a blistering 14.7% gain in March. The slowdown came as COVID lockdowns hit supply chains and closed factories, adding to worries about growth in the world’s No. 2 economy.

Investors are already concerned that the Federal Reserve won’t get the balance right in its interest rate increases, which could possibly trigger a recession.

Ole Hansen, head of commodity strategy at Saxo Bank, said fresh data showed speculators cut some bullish commodity bets across 24 major futures contracts to a four-month low in the week to May 3.

“Driven by China lockdowns, rising inflation and monetary tightening have led to a loss of momentum, especially across industrial and precious metals. From a recent prewar and pre-China lockdown peak on Feb. 22 the net long in energy is, despite strong price gains, down by 23%, the metal sector is down 67% while the agriculture sector is up 2% led by softs,” he said, in a note to clients.

Hansen said multiyear highs for refined products were already hurting demand in that sector in the energy space.

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