Saudi Arabia, the world’s largest exporter of crude oil, has made the biggest price cuts on its crude grades since May as demand recovery for fuel hopes continues to fade.

Due to the ongoing COVID-19 pandemic, crude oil prices has continued to drift lower as price fall got triggered in part as traders reacted to Saudi Arabia’s massive price discounts for supply to Asia.

Brent oil futures lost about 1.05% to $42.21 by (3.39 AM GMT) and West Texas Intermediate futures plunged by 1.13% to $39.32, falling below the $40 critical support price level.

The Saudis made their biggest price cuts on their crude grades since May, as demand recovery for fuel hopes faded over the resurgence of the COVID-19 pandemic.

As the number of global COVID-19 caseloads continue to surge with about 27 million cases as of September 7, it became pertinent for the Saudis to make the significant cut in prices, according to data retrieved from Johns Hopkins University data.

In an explanatory note to explain the need for the cuts, Stephen Innes, Chief Global Market Strategist at AxiCorp, gave vital insights on crude oil price movement of late.

“Oil prices continued to plummet at the NYMEX Sunday open, wasting little time picking up from where Friday’s beat down left off.

Into weeks’ end, crude oil prices got hammered lower in concert with weakness in US equity markets. Indeed, for the oil’s complex, it was terrible timing for a general market risk meltdown, which coincided with the US Labor Day weekend and the end of the US driving season where oil traders were in a de-risking mode anyway.”

Innes also spoke on how the September seasonality effect dampened crude oil traders’ bullish bias.

“Continued US Dollar strength kept the pressure on oil prices. And bearish price action on the broader market was also a factor suggesting it is not only the September seasonality effect that was hurting oil.

It was a double-barrel effect as the combination of seasonality and general dreary market sentiment contributed to the precipitous price fall into the long weekend. And traders were not pricing for any colossal pick-up in demand as US driving season takes its final lap.”

Crude traders are now hoping for temporary relief from record losses after a massive 9% weekly sell-off, which might come from some monetary or fiscal policy encouragement to jump back on the bullish momentum again in any meaningful way.