WTI crude oil futures sank below $70 per barrel on Tuesday as a shakily forged debt ceiling deal threatened to disrupt financial markets.
WTI plunged 3.13 by noon—a 4.14% dip on the day—below the psychological $70 barrier. The WTI July contract was trading at $69.54 per barrel as the market began to lose faith in lawmakers and the Biden Administration to finalize the deal that would raise the debt ceiling for the United States so it would be able to continue meeting its financial obligations.
Aside from the debt ceiling uncertainties clouding the markets, OPEC is set to meet on June 4 to discuss its own plans for production. While OPEC—via Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman—dropped not-so-subtle hints that it could once again cut production further, leaving short sellers and speculators “ouching”, further production cuts are anything but certain. But OPEC+ heavyweight Russia has dropped several hints that it would be supporting no change to the production pact.
As for the debt ceiling bill, the House of Representatives Rules Committee is set to consider the bill today at 3 pm, after which the House of Representatives and Senate will vote. U.S. President Joe Biden and House Speaker Kevin McCarthy are confident they will get enough votes for the deal to pass, but the oil market is less certain of this outcome.
The Senate vote could drag out into the weekend should Republican Mike Lee get his way, pushing the resolution to the matter dangerously close to OPEC+’s meeting date in what could be a cataclysm of forces that could send oil prices swinging wildly.
The Brent crude July contract was trading down 4.22% at $73.81 at noon.
By Julianne Geiger for Oilprice.com
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