Oil prices climbed for the third consecutive day on Wednesday, driven by a decline in US crude inventories and optimistic remarks from Saudi Arabia’s Energy Minister regarding a potential Opec+ output cut.
At 4:30 pm UAE time on Wednesday, Brent crude, which serves as a benchmark for two-thirds of the world’s oil, was trading 1.29% higher at $77.83 per barrel. West Texas Intermediate (WTI), the benchmark for US crude, rose 1.49% to $74 per barrel.
“Oil prices are trading higher again, buoyed by the latest warning from Saudi Arabia directed at short sellers,” noted Craig Erlam, senior market analyst at Oanda.
During the Qatar Economic Forum on Tuesday, Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, cautioned oil market short sellers, stating that they should “watch out” as traders become bearish due to concerns about a potential recession and the US facing a potential debt default.
The Opec+ group, consisting of 23 oil-producing countries, is scheduled to convene on June 4.
In April, Brent crude surpassed $85 per barrel after certain Opec+ members announced voluntary production cuts totaling 1.16 million barrels per day.
“As we approach the weekend, traders may not be as eager to test the group’s resolve since the market experienced a significant gap up last time,” added Mr. Erlam. “However, a failure to follow through could result in sharp price reversals.”
Data from the American Petroleum Institute revealed that US crude inventories, an indicator of fuel demand, declined by 6.8 million barrels last week.
Optimism surrounding a US debt deal has also contributed to the support for oil futures.
Negotiations to avert a US debt default remain ongoing, with discussions resuming on Tuesday after President Joe Biden and the Republican Speaker of the House failed to reach an agreement before the June 1 deadline.
A potential default would impact American consumers and have ripple effects throughout the global financial system.
Saugata Saha, President of S&P Global Commodity Insights, cautioned that such a default would lead currency markets into uncharted territory, affecting energy prices and trading, as most crude oil transactions are conducted in US dollars. Saha highlighted that severe recessions would likely ensue, further impacting energy consumption and demand.
