Oil fell on Tuesday, giving up earlier gains, as concerns about the viability of the U.S. debt ceiling pact cooled the market’s risk-on sentiment and mixed messages from major producers have clouded the supply outlook ahead of their meeting this weekend.
Brent crude futures fell 50 cents, or 0.7%, to $76.57 a barrel by 0453 GMT after rising by 0.5% earlier on Tuesday.
U.S. West Texas Intermediate (WTI) crude dipped 35 cents to $72.32 a barrel, down 0.5% from Friday’s close. There was no settlement on Monday because of a U.S. public holiday.
Biden and McCarthy forged an agreement on the debt over the weekend and it must pass a divided U.S. Congress before June 5, the day the Treasury Department say the country will not be able to meet its financial obligations, which could disrupt financial markets.
“(The) contradictory statements from Republicans and lawmakers are keeping investors largely invested in the stand-off,” said Priyanka Sachdeva, Market Analyst from Phillip Nova.
“Investors have shifted their attention to the outcome of the OPEC+ meeting this weekend as there have been mixed messages from major oil producers,” Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd, said.
Saudi Arabian Energy Minister Abdulaziz bin Salman last week warned short-sellers betting that oil prices will fall to “watch out,” a possible signal that OPEC+ may cut output.
However, comments from Russian oil officials and sources, including Deputy Prime Minister Alexander Novak, indicate the world’s third-largest oil producer is leaning toward leaving output unchanged.
“The voluntary production cuts in April caught the market off guard. This time, investors are extremely cautious before the final decision is announced,” said analysts from Haitong Futures in a note.
Chinese manufacturing and service sector data out later this week will also be scrutinized for cues on the fuel demand recovery in the world’s top oil importer.