Oil Prices Stuck Between Debt Ceiling Uncertainty And More OPEC+ Cuts

• Oil prices were down slightly on Thursday morning, with WTI trading at $73.83 while Brent is trading at $77.94.
• While fears of a potential U.S. debt default are weighing on prices, the prospect of a further OPEC+ cut in early June is providing some upward pressure.
• Both the debt ceiling saga and the OPEC+ meeting are due to come to a head in early June, leaving oil markets in wait-and-see mode this week.

Crude oil prices began to trade on Thursday with little change from Wednesday’s close as opposing forces kept them stable.

On the one hand, fear of a U.S. debt default is driving bearish sentiment and the respective trade behavior, which is pressuring prices.

On the other hand, the Saudi Energy Minister suggested earlier this week OPEC+ might cut more output unless short sellers behave, and that lent oil some upward pressure.

"Speculators, like in any market they are there to stay, I keep advising them that they will be ouching, they did ouch in April, I don't have to show my cards I'm not a poker player... but I would just tell them watch out," Abdulaziz bin Salman said, as quoted by Reuters.

Reuters again noted in a separate report that OPEC+ would now more or less have to announce another production cut at its next meeting, lest it’s seen as making empty threats.

In addition to these, the Energy Information Administration reported a massive estimated drawdown in U.S. crude oil inventories plus higher gasoline production and a draw in gasoline inventories, suggesting healthy demand.

As a result of all this, Brent crude was trading below $78 per barrel at the time of writing, down slightly from Wednesday’s close, and West Texas Intermediate was trading at just under $74 per barrel, also recording a slight decline from Wednesday’s closing price.

"A cautious lid on the risk environment brought by the U.S. debt ceiling uncertainty has also put oil prices on some wait-and-see in the Asia session," IG analyst Yeap Jun Rong told Reuters.

“The outlook for the oil market appears poor for now: macroeconomic drivers like the US debt-deal negotiations and tighter US monetary policy are weighing,” Sean Lim, an oil and gas analyst with Malaysian RHB Investment Bank, told Bloomberg.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:

• Are We Nearing An Inflection Point For Oil?
  
• European Natural Gas Prices Drop To The Lowest Level Since 2021
  
• China Is Breaking Records As Its Solar Industry Booms