Oil rose as traders evaluated a warning from Saudi Energy Minister Prince Abdulaziz bin Salman to short-sellers, offsetting a lack of tangible progress in US debt-limit talks.
(Bloomberg) — Oil rose as traders evaluated a warning from Saudi Energy Minister Prince Abdulaziz bin Salman to short-sellers, offsetting a lack of tangible progress in US debt-limit talks.
West Texas Intermediate for July traded near $73 a barrel, following a 0.5% gain on Monday, after Saudi Arabia’s top energy official warned oil short-sellers at the Qatar Economic Forum: “I keep advising them that they will be ouching — they did ouch in April”. 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.
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Earlier, US House Speaker Kevin McCarthy said he and President Joe Biden a deal to avert a default has yet to be struck, despite saying talks were productive. 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.
Both economic and supply threats have emerged in the market. A standoff over the debt ceiling could put strain on the US economy and impact oil demand just as OPEC and its allies prepare to review production targets on June 3-4 in Vienna. Prince Abdulaziz’s warning Tuesday raises the prospect that more cuts can be in store, after the oil cartel justified its April surprise trim as an attempt to stop speculators.
While several OPEC delegates have said there’s no need for further action now as curbs already in place will help tighten global markets, Prince Abdulaziz has been known for orchestrating surprise interventions.
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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% 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.
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