Home/ Markets / Commodities/  Oil eases as US debt risk weighs on prices and Russia plays down on additional OPEC+ cuts

Oil prices fell on May 25 after Russian Deputy Prime Minister Alexander Novak played down the prospect of further OPEC+ production cuts at its meeting next week. "I don't think that there will be any new steps, because just a month ago certain decisions were made regarding the voluntary reduction of oil production by some countries..." Novak was quoted as saying by a Russia-based newspaper.

Brent crude futures was down 41 cents, or 0.5 per cent, to $77.95 a barrel. US West Texas Intermediate crude (WTI) fell 51 cents, or 0.7 per cent, to $73.83. In the previous session, oil prices gained strength from the warning from Saudi Arabia's energy minister that short-sellers betting oil prices will fall should 'watch out' for pain.

Also Read: Crude oil prices likely to remain elevated. Here's why

OPEC+ cuts: Some investors took that the warning from Saudi's energy minister as a signal that the Organization of Petroleum Exporting Countries (OPEC) and allies including Russia, together called OPEC+, could consider further output cuts at its next meeting on June 4.

"The obvious reading is that the Kingdom may either unilaterally cut oil production or orchestrate a wider OPEC+ reduction ...thereby supporting prices and stinging speculators that are shorting oil," according to analysts at bank MUFG.

US debt risk: Uncertainty over US debt also weighed on oil prices. House Speaker Kevin McCarthy said that some progress had been made but several issues remained unresolved in negotiations, as the deadline ticked closer to raise the federal government's $31.4 trillion borrowing limit or risk default.

Negotiators for US Joe Biden and top congressional Republican Kevin McCarthy reconvened this week at the White House to try to close a deal. The decline in prices were limited by an unexpected, massive fall in US crude oil inventories in the week, as reported by the Energy Information Administration (EIA).

US crude inventories fell by 12.5 million barrels to 455.2 million barrels as imports declined. Analysts had expected an 800,000-barrel rise. Gasoline inventories dropped by 2.1 million barrels in the week to 216.3 million barrels, the EIA said, while distillate stockpiles fell by 600,000 barrels to 105.7 million barrels.

Palm oil import: Meanwhile, India's palm oil imports in May are set to fall to their lowest in 27 months as its rare premium over other edible oils prompted buyers to cancel cargoes and replace them with soyoil and sunflower oil.

The surprising drop in palm oil imports by India, the world's biggest importer of vegetable oils, could bring down palm oil prices . Malaysia and Indonesia, the two largest global producers, may lower their palm oil offers to regain market share from other edible oils.

The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange fell 1.85 per cent to 3,365 ringgit a tonne after news agency Reuters reported the drop in Indian imports.

Around 261,000 tonnes of palm oil was discharged at various Indian ports in the first twenty days of May and another 150,000 tonnes is expected to be discharged in the remaining 11 days, for a total of 411,000 tonnes, according to Reuters.

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Updated: 25 May 2023, 06:45 PM IST
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