(Bloomberg) – Oil fell the most since early May after Russia downplayed the likelihood of another OPEC+ production cut.
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The Organization of the Petroleum Exporting Countries and its allies are unlikely to take further action at their June meeting, Russian Deputy Prime Minister Alexander Novak said in an interview with Izvestia on Thursday. West Texas Intermediate then stabilized below $72 a barrel, erasing earlier gains triggered by a warning from Saudi Arabia on Tuesday that short sellers in the oil market should “be careful”.
The Saudi joke appeared to briefly insulate oil price action from broader market sentiment, which took a hit amid Washington’s debt ceiling turmoil. However, a stronger dollar on Thursday magnified crude’s losses.
Crude behaves “like a toddler that oscillates very quickly and often, reacting not to reason but to emotion,” said Rebecca Babin, senior energy trader at CIBC Private Wealth.
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Crude futures are down about 9% this year as China’s muted economic rebound and US monetary policy tightening combine to weigh on prices. Federal Reserve officials are leaning towards pausing interest rate hikes in June, while signaling that they are not yet ready to end their fight against inflation. Citigroup Inc. questioned previous oil demand growth forecasts, saying “multiple signs” suggest it is unlikely to come any closer.
Meanwhile, in Washington, the deadlock over a US debt deal has rattled markets in recent weeks. Fitch Ratings has placed the country’s AAA credit rating under scrutiny – a sign of growing unease over the country’s ability to avoid a first default – hours after House Speaker Kevin McCarthy said said there was still time to reach an agreement.
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