Oil fell by nearly 2% on Tuesday as concerns about the U.S. debt ceiling pact cooled the market’s risk-on sentiment and mixed messages from major producers clouded the supply outlook ahead of their meeting this weekend.
Brent crude futures fell $1.36, or 1.8%, to $75.71 a barrel while U.S. West Texas Intermediate (WTI) crude was down $1.19, or 1.6%, from Friday’s close, to $71.48 a barrel. There was no settlement on Monday because of a U.S. public holiday.
Some hard-right Republican lawmakers said on Monday they might oppose a deal that would raise the debt ceiling in the U.S., the world’s biggest oil user, while Democratic President Joe Biden and Republican House of Representatives Speaker Kevin McCarthy remained optimistic the deal would pass.
Biden and McCarthy forged an agreement over the weekend and it must pass a divided U.S. Congress before June 5, the day the Treasury Department says the country will not be able to meet its financial obligations, which could disrupt financial markets.
The debt deadline nearly coincides with the June 4 meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known as OPEC+, and the uncertainty over whether they will increase their output cuts amid a recent slump in prices is also weighing on the market.
Saudi Arabian Energy Minister, Abdulaziz bin Salman last week warned short-sellers betting that oil prices will fall to “watch out” in a possible signal that OPEC+ may cut output.
However, comments from Russian oil officials and sources, including Deputy Prime Minister Alexander Novak, indicate the world’s third-largest oil producer is leaning toward leaving output unchanged.