Crude Oil Drops 2% as Russia Signals No Further Output Cut

By Adedapo Adesanya

Crude oil lost more than 2 per cent on Thursday after Russian Deputy Prime Minister, Mr Alexander Novak, played down the prospect of further production cuts by the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) at its meeting next week.

Data showed that Brent crude depreciated by $2.10 or 2.7 per cent to $76.25 a barrel while the US West Texas Intermediate crude (WTI) decreased by $2.51 or 3.4 per cent to $71.83 per barrel. At their session low, both benchmarks were down by more than $3.

Oil prices began falling after Mr Novak was quoted saying he did not think additional OPEC+ cuts were likely.

“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…,” local media reported.

Mr Novak also said that high US interest rates and a slower-than-expected Chinese economic recovery were holding back oil prices from rising further.

Saudi Arabia and other OPEC+ oil producers announced cuts of more than one million barrels per day in April after crude prices in March fell towards $70 a barrel, the lowest in 15 months.

However, Mr Novak said he expected Brent price to be above $80 a barrel by the end of the year.

On Tuesday, oil prices were supported when Saudi Arabia’s energy minister warned that short-sellers betting oil prices would fall should “watch out” for pain.

Some investors took that as a signal that OPEC+, the Organization of Petroleum Exporting Countries and allies, including Russia, could consider further output cuts at a meeting on June 4.

The market gained some support as the US President, Mr Joe Biden and top congressional Republican, Mr Kevin McCarthy, appeared near a deal to cut spending and raise the government’s $31.4 trillion debt ceiling, with little time to spare to head off the risk of default before a June 1 date.

Prices were also supported by the tightening of US crude as the Energy Information Administration (EIA) estimated inventories in the country had shed 12.5 million barrels in the week to May 19.

Prior to this, the American Petroleum Institute (API) had estimated that crude oil inventories in the US had gone down by a sizable 6.7 million barrels, which surprised traders and prompted increased oil buying that boosted prices.