Oil prices fall amid concerns over US debt ceiling

American crude stocks fell by 12.5 million barrels last week, according to government data

TAFT, CA - JULY 22:  Oil rigs just south of town extract crude for Chevron at sunrise on July 22, 2008 in Taft, California. Hemmed in by the richest oil fields in California, the oil town of 6,700 with a stagnant economy and little room to expand has hatched an ambitious plan to annex vast expanses of land reaching eastward to Interstate 5, 18 miles away, and taking over various poor unincorporated communities to triple its population to around 20,000. With the price as light sweet crude at record high prices, Chevron and other companies are scrambling to drill new wells and reopen old wells once considered unprofitable. The renewed profits for oil men of Kern County, where more than 75 percent of all the oil produced in California flows, do not directly translate increased revenue for Taft. The Taft town council wants to cash in on the new oil boom with increased tax revenues from a NASCAR track and future developments near the freeway.  In an earlier oil boom era, Taft was the site of the 1910 Lakeside Gusher, the biggest oil gusher ever seen in the US, which sent 100,000 barrels a day into a lake of crude.  (Photo by David McNew/Getty Images)
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Oil prices fell on Thursday amid concerns about the US debt ceiling impasse and as Russia played down the chances of further Opec+ production cuts.

Brent, the benchmark for two thirds of the world’s oil, was trading 1.79 per cent lower at $76.95 a barrel at 3.40pm UAE time on Thursday.

West Texas Intermediate, the benchmark for US crude, was down 1.96 per cent at $72.88 a barrel.

On Wednesday, Brent settled 1.98 per cent higher at $78.36 while WTI was up 1.96 per cent at $74.34 a barrel.

“Crude has been dragged down as debt ceiling talks are still hung up on spending, but the supply and demand side drivers are slowly turning bullish here,” said Edward Moya, a senior market analyst at Oanda.

The US is days away from a potential debt default, which would wreak havoc on US consumers and the American economy, as well as send shock waves across the entire global financial system.

US President Joe Biden's administration and Republicans are currently at an impasse over raising the federal $31.4 trillion debt ceiling, with each side describing another's proposals as too extreme.

Meanwhile, Russian Deputy Prime Minister Alexander Novak said he expected no new steps from the Opec+ group of 23 oil-producing countries at its meeting on June 4, Reuters reported on Thursday, citing his interview with Russian newspaper Izvestia daily.

“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 due to the fact that we saw the slow pace of global economic recovery,” Mr Novak was quoted as saying.

Brent has lost about 10 per cent of its value since the beginning of the year amid demand concerns and a regional banking crisis in the US, which rattled financial markets.

The international benchmark rose to about $85 a barrel in April after some Opec+ members announced combined voluntary production cuts of 1.16 million barrels per day.

The group slashed its collective output by 2 million bpd last year in response to signs of a global economic slowdown.

On Tuesday, Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman told oil market short sellers to “watch out” as traders turn bearish on concerns about the fuel demand outlook.

“I keep advising them that they will be 'ouching'. They did 'ouch' in April,” said Prince Abdulaziz.

Meanwhile, US crude stocks, an indicator of fuel demand, fell by 12.5 million barrels in the week ending on May 19, according to the US Energy Information Administration.

Total petroleum stocks fell by 2.1 million barrels while distillate fuel inventories were down by 600,000 barrels, the data showed.

Updated: May 25, 2023, 12:34 PM