“Oil Prices Fall as Debt Ceiling Agreement Concerns and Mixed Messages from Major Producers Cast Shadow over Supply Outlook”

Oil prices

Oil prices fell about 2% today, Tuesday, as concerns about the possibility of ratification of the debt ceiling agreement in the United States undermined risk appetite, while mixed messages from major oil producers cast a shadow over the outlook for supply before their upcoming meeting days later.

Brent crude futures fell $1.36, or 1.8%, to $75.71 a barrel by 08:59 GMT, and US West Texas Intermediate crude fell $1.19 to $71.48 a barrel, down 1.6% from the closing price on Friday. There was no settlement on Monday, since it was a public holiday in the United States.

Some hard-line Republicans said on Monday that they might oppose the debt ceiling agreement in the United States, the world’s largest oil consumer, but Democratic President Joe Biden and Republican House Speaker Kevin McCarthy remain optimistic about the deal’s ratification.

Over the weekend, Biden and McCarthy reached an agreement to suspend the $31.4 trillion debt ceiling and limit government spending for the next two years. The agreement must be approved by a divided Congress before June 5, the day the Treasury Department said the country may not be able to meet its obligations, which could cause turbulence in financial markets.

The deadline for approving the debt ceiling roughly coincides with a meeting scheduled for June 4 of the “OPEC +” alliance, which includes the Organization of the Petroleum Exporting Countries “OPEC” and allies including Russia, amid uncertainty about whether the alliance will announce further cuts. production after the recent decline in prices.

“Investors have shifted their attention to the results of the OPEC+ meeting…with conflicting messages coming from major oil producers,” said Toshitaka Tazawa, an analyst at Fujitomi Securities.

Last week, Saudi Energy Minister Abdulaziz bin Salman warned short sellers who are betting that oil prices will drop, in a possible sign that OPEC+ may curtail production.

However, statements by officials and sources in the Russian oil sector, including Deputy Prime Minister Alexander Novak, indicated that the third largest oil producer in the world tends to leave the level of production unchanged.

In April, Saudi Arabia and other members of OPEC + announced further cuts in oil production by about 1.2 million barrels per day, bringing the total volume of the bloc’s cuts to 3.66 million barrels per day, according to Reuters calculations.

Traders are also awaiting data on manufacturing and services sector in China, which will be released later this week, in search of signs of recovery in fuel demand from the largest importer of oil in the world.

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