Oil prices are fighting hard to regain some ground after falling hard on Tuesday, but WTI still is barely above $38.

Prices fell hard on Tuesday, falling from near $40 per barrel at the close of trading on Monday to $36.76 on Tuesday after Saudi Arabia cut its official selling price (OSP) for October to two of its largest buyers, Asian and U.S. refineries, and after one of the most promising Covid-19 vaccine trials was put on hold due to an adverse reaction.

The news is bad for oil demand, which is counting on lockdowns being lifted and businesses opening in order to see a full recovery.

Nevertheless, oil futures rose early on Wednesday, but a further upswing in Covid-19 cases in India, Great Britain, and a handful of other countries, along with disappointing news from the EIA about its oil demand growth projections, stymied the rally.

The Energy Information Administration (EIA) on Wednesday once again lowered its oil demand growth forecast by another 210,000 barrels per day, for a total annual decline of 8.32 million bpd for this year.

The EIA lowered its global oil demand growth forecast for next year as well, by another 490,000 bpd.

The EIA is also expected that U.S. oil production will not fall as far as originally thought this year.

While it is customary for the oil market to recoil whenever Aramco cuts significantly its OSP—which is a proxy for announcing to the world that it sees the demand for its oil waning—the huge selloff on Tuesday highlights the precarious nature of even modest oil prices in today’s environment.

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By 1:40 pm EDT, WTI had risen $1.41 (+3.84%) to $38.17 per barrel, while Brent crude had risen $1.16 (+2.92%) to $40.94 per barrel.

By Julianne Geiger for Oilprice.com

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