Before the OPEC+ meeting, oil prices surge, allaying worries about the debt ceiling
A plan to postpone the U.S. debt limit was passed by the House of Representatives, which helped to lessen the effect of the nation’s expanding stockpiles. Oil prices surged on Thursday, climbing the most in two weeks, ahead of an OPEC+ meeting on Sunday.
The price of U.S. West Texas Intermediate oil (WTI), which has been trading at $70.10 a barrel since May 5, increased $2.01, or 3%, to close the day at that price.
The price of Brent oil futures increased by $1.68, or 2.3%, to end at $74.28 a barrel, marking their highest daily gains since May 17.
After the House approved a plan late on Wednesday to temporarily suspend the U.S. government’s debt limit and increase the likelihood of avoiding a default, both benchmarks rebounded after two consecutive sessions of losses. The Senate will now consider the measure.
“The successful debt ceiling negotiations clear that minefield, but the overall demand outlook is still murky – the trucking space is doing poorly, for example,” said CFRA Research analyst Stewart Glickman.
The Organization of the Petroleum Exporting Countries and its allies, which includes Russia, will convene on June 4 in order to discuss global energy policy.
In light of the Saudi oil minister’s “watch out” warning, the OPEC+ meeting this weekend “might be leading to a little caution around those (low price) levels,” according to OANDA analyst Craig Erlam.
Four OPEC+ sources told Reuters that the alliance is unlikely to increase production cuts at the Sunday meeting, although other experts argue that it is still a possible given the recent disappointment of demand indications from China and the U.S.
According to statistics from the Energy Information Administration, U.S. crude oil stocks unexpectedly increased last week as imports increased and strategic reserves decreased to their lowest level since September 1983. [EIA/S]
“Third Bridge experts would not rule out more aggressive actions from OPEC+, but the tug-of-war in the market right now is the seasonal versus the cyclical,” Third Bridge analyst Peter McNally said.
“We are keeping an eye on how robust the summer demand bump in the developed world will be in comparison to the challenges facing China’s cyclical recovery. The success of OPEC+ will depend on this, said McNally.
