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Crude Oil Prices Dip by 3%: Russia's Stance on OPEC+ Cuts Influences the Market

A ripple effect is felt in the oil market as Russia dismisses prospects of additional OPEC+ production cuts.

Opec+ sign
Opec+ sign

Russian Official's Remarks on Impact Oil Prices

Russian Deputy Prime Minister Alexander Novak recently expressed skepticism about further OPEC+ production cuts at the upcoming meeting, leading to a decline in oil prices. As of Thursday, Brent crude futures were down $2.03 or 2.6% to $76.33 a barrel. Additionally, U.S. West Texas Intermediate (WTI) crude decreased by $2.10, or 2.8%, to $72.24.

Conflicting Messages from OPEC+

OPEC+ has been giving mixed signals regarding its next moves in oil policy. The flux of information and uncertainty surrounding the next meeting make it difficult to predict the outcome. Amid these speculations, Saudi Arabia's energy minister warned those betting on falling oil prices, indicating potential pain.

Possibility of Further Output Cuts

Some investors perceived the Saudi minister's warning as indicating that the OPEC+ coalition, including Russia, might discuss further output cuts in their meeting on June 4. Analysts from MUFG Bank speculated that Saudi Arabia might either cut oil production individually or organize a broader OPEC+ reduction to support oil prices and thwart speculators betting against them.

Uncertainty Looms over U.S. Debt Ceiling

The ongoing uncertainty over the U.S. debt ceiling also contributed to the dip in oil prices. Despite progress in negotiations, several issues remain unresolved concerning the federal government's $31.4 trillion borrowing limit, per House Speaker Kevin McCarthy's statement on Thursday.

U.S. Crude Inventories' Unexpected Drop

Despite the market uncertainty, the price decline was partially offset by an unexpectedly large decrease in U.S. crude oil inventories in the week leading up to May 19, according to the Energy Information Administration. The inventories fell by 12.5 million barrels to 455.2 million barrels, countering analyst expectations of an 800,000-barrel increase. During the same period, gasoline inventories dropped by 2.1 million barrels, while distillate stockpiles fell by 600,000.