Oil fluctuated as traders weighed an unresolved US debt-limit and mostly shrugged off a warning by Saudi Energy Minister Prince Abdulaziz bin Salman to short-sellers.
West Texas Intermediate for July traded near $72 a barrel after that contract added 0.5 per cent on Monday. US House Speaker Kevin McCarthy said he and President Joe Biden had a productive talk, although a deal to avert a default has yet to be struck. Before the meeting, Treasury Secretary Janet Yellen had warned it was now highly likely her department would run out of sufficient cash in early June.
At the Qatar Economic Forum, Saudi Arabia’s top energy official warned oil short-sellers: “I keep advising them that they will be ouching — they did ouch in April,” he said at the event in Doha on Tuesday. “I would just tell them: Watch out!” Saudi Arabia, the de facto leader of the OPEC+ cartel, was among nations that surprised the global crude market recently with a supply cut that started to take effect from this month.
Brent and West Texas Intermediate futures briefly ticked up by about 20 cents, but both gave up those small gains and are down on the day. OPEC and its allies will meet on June 3-4 in Vienna to review production policy for the second half of the year.
The showdown in Washington has dominated sentiment in commodity markets in recent days as talks go down to the wire. A US default risks catastrophic financial and economic disruption that would imperil energy demand.
Crude has retreated by about 10 per cent so far this year as China’s lackluster recovery out of Covid restrictions, and the US Federal Reserve’s most aggressive monetary tightening campaign in a generation, combined to weigh on sentiment. Also, Russian oil exports have remained robust, with flows not yet showing signs of the output cuts that the country insisted it was making.
“While the broader macro conditions remained complex as hawkish Fed speak and debt ceiling deadlock weigh, crude oil prices have managed to settle into a relatively tight range,” said Ole Hansen, head of commodities strategy at Saxo Bank A/S. The supply side is mixed, with Russian exports remaining firm while OPEC’s early April production cut is only now starting to be felt, he said.
While Fed Chair Jerome Powell earlier signaled a pause in interest-rate increases in June, other central bank officials said they saw the need to raise borrowing costs even further, potentially depressing energy demand.
- WTI for July delivery was flat at $72.07 a barrel at 10:33 a.m. in London.
- Brent for July settlement stood at $76.02 a barrel.
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