Oil tumbled on Tuesday, eclipsing previous gains as concerns over the viability of the US debt ceiling pact deal dampened risk appetite in the market and mixed messages from OPEC+ allies clouded the supply outlook ahead of this weekend’s meeting.
Brent crude futures fell 59 cents, or 0.8%, at 0615 GMT to $76.48 a barrel, after rising 0.5% earlier on Tuesday.
West Texas Intermediate (WTI) crude fell 42 cents to $72.25 a barrel, down 0.6% from Friday’s close. No transactions were made on Monday due to a public holiday in the US.
Joe Biden and Kevin McCarthy are optimistic that the deal will be accepted, while some far-right Republican lawmakers said on Monday they could oppose a deal that would raise the US debt ceiling.
Democratic President Joe Biden and Republican Speaker of the House of Representatives Kevin McCarthy struck a deal on the debt over the weekend, and the deal must pass the divided US Congress by June 5.
The Treasury Department announced that the country may not be able to fulfill its financial obligations, which may distort financial markets, as of June 5th.
Contradictory statements by Republicans and lawmakers are driving investors largely hesitant.
The maturity of the debt almost coincides with the June 4 meeting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, and uncertainty has increased over whether it will increase production cuts due to the recent decline in prices. This is also affecting the prices.
Investors turned their attention to the outcome of this weekend’s OPEC+ meeting as mixed messages came from major oil producers.
Saudi Arabian Energy Minister Abdulaziz bin Salman last week warned short-sellers that oil prices would fall, as a possible signal that OPEC+ could cut production.
However, comments from Russian oil officials and sources, including Deputy Prime Minister Alexander Novak, indicate that the world’s third-largest oil producer tends to leave production unchanged.
According to calculations, in April, Saudi Arabia and other OPEC+ members announced another 1.2 million barrels per day of oil production cuts, bringing the total volume of cuts made by OPEC+ to 3.66 million barrels per day.
Voluntary production cuts in April caught the market off guard. But this time, investors are being extremely cautious before the final decision is announced.
China’s manufacturing and services sector data, which will be released later this week, will also provide clues about the recovery of fuel demand in the world’s largest oil importer.