Oil fell as tensions over the U.S. debt-ceiling impasse rose and Russia played down the chances that OPEC+ will cut production further.
West Texas Intermediate dropped toward US$74 a barrel after rallying nearly four per cent over the previous three days as U.S. crude inventories sank and Saudi Arabia warned speculators to “watch out.” Fitch Ratings said it may downgrade U.S. credit ratings to reflect the partisanship preventing a debt-ceiling deal.
The Organization of Petroleum Exporting Countries and its allies are unlikely to take any new steps at their first face-to-face meeting in six months in early June after a recent decision to cut output, Russia's Deputy Prime Minister Alexander Novak said in an interview with Izvestia.
Crude is down almost eight per cent for the year as lackluster Chinese growth and tighter U.S. monetary policy combined to subdue prices. U.S. Federal Reserve officials are leaning toward pausing rate hikes in June, though they also signaled they're not yet ready to end their fight against inflation.
“The outlook for the oil market appears poor for now: macroeconomic drivers like the US debt-deal negotiations and tighter U.S. monetary policy are weighing” on prices, said Sean Lim, an oil and gas analyst at RHB Investment Bank Bhd in Kuala Lumpur. Still, as China's recovery picks up steam, prices should gain over the second half, he said.
In the Middle East, a bulk carrier that had run aground in the Suez Canal, risking fresh disruption to flows through the vital trade route, was refloated. There have been several groundings in the canal this year, the most recent in March, which caused no delay to traffic in the waterway.
Prices:
- WTI for July delivery fell 0.4 per cent to US$74.05 a barrel at 7:27 a.m. in London.
- Brent for July settlement was 0.3 per cent lower at US$78.16 a barrel.
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