Oil Falls as Russia Negates Production Cut Notion

Oil fell the most since early May after Russia downplayed the likelihood of another OPEC+ production cut.

The Organization of Petroleum Exporting Countries and its allies are unlikely to take any new steps at its June meeting, Russian Deputy Prime Minister Alexander Novak said in an interview Thursday with Izvestia. West Texas Intermediate subsequently settled below $72 a barrel, erasing earlier gains sparked by a warning from Saudi Arabia on Tuesday that oil market short-sellers should “watch out.” 

The Saudi quip appeared to briefly insulate oil price action from broader market sentiment, which took a beat amid debt ceiling turmoil in Washington. However, a stronger dollar Thursday magnified crude’s losses.

Crude is behaving “like a toddler swinging from high to low very quickly and often, not reacting to reason but emotion,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth.

Crude futures are down about 9% this year, with China’s muted economic rebound and tighter US monetary policy combining to weigh on prices. Federal Reserve officials are leaning toward pausing interest rate hikes in June, while signaling they’re not yet ready to end their fight against inflation. Citigroup Inc. cast doubt on previous oil demand growth forecasts, saying “multiple signs” suggest it’s unlikely to come close.

Meanwhile in Washington, the standoff over a US debt deal has roiled markets in recent weeks. Fitch Ratings placed the country’s AAA credit rating on watch — a sign of growing unease about the nation’s ability to avert a first-ever default — hours after House Speaker Kevin McCarthy said there was still time to get an agreement.

Prices:

• WTI for July delivery fell $2.51 to settle at $71.83 a barrel in New York.
• Brent for July settlement dropped $2.10 to settle at $76.26.