NEW YORK – Oil prices fell more than 4 percent on Tuesday on concerns about whether the U.S. Congress will pass the U.S. debt ceiling pact and as mixed messages from major producers clouded the supply outlook ahead of the OPEC+ meeting this weekend.
Brent crude futures settled down $3.53, or 4.6 percent, at $73.54 a barrel. U.S. West Texas Intermediate crude (WTI) was down $3.21, or 4.4 percent, from Friday’s close, to $69.46 a barrel. There was no settlement on Monday because of a U.S. public holiday.
Some hard-right Republican lawmakers said they might oppose a deal to raise the debt ceiling in the U.S., the world’s biggest oil user. 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 that must pass a divided U.S. Congress before June 5, the day the Treasury Department has said the country will not be able to meet its financial obligations, which could disrupt financial markets. McCarthy on Tuesday urged members of his party to support the deal.
“The big elephant in the room is the continued drama over the debt ceiling,” said Phil Flynn, an analyst at Price Futures Group. “Until we get the votes, the market is going to be on edge.”
The House Rules Committee is due to consider the 99-page bill at 3 p.m. (1900 GMT) on Tuesday, ahead of votes in the Republican-controlled chamber and the Democratic-led Senate
The debt deadline nearly coincides with the June 4 meeting of OPEC+ – the Organization of the Petroleum Exporting Countries and allies including Russia. Traders were uncertain about whether the group will increase output cuts as a slump in prices weighs 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.
In April, Saudi Arabia and other members of OPEC+ announced further oil output cuts of around 1.2 million barrels per day (bpd), bringing the total volume of cuts by OPEC+ to 3.66 million bpd, according to Reuters calculations.
Chinese manufacturing and service sector data out later this week will also be scrutinized for cues on the fuel demand recovery in the world’s top oil importer.