Oil Closes 2% Higher Ahead Crucial OPEC+ Meeting
By Adedapo Adesanya
Oil rose over 2 per cent on Friday after the United States Congress passed a debt ceiling deal that averted a government default in the world’s biggest oil consumer and jobs data fueled hopes for a possible pause in Federal Reserve interest rate hikes.
The focus is now on a meeting of the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, OPEC+, this weekend.
Brent futures rose $1.85 or 2.5 per cent yesterday to $76.13 a barrel, while the US West Texas Intermediate (WTI) futures appreciated by $1.64 or 2.3 per cent to $71.74 a barrel, the highest since May 26 for WTI and May 29 for Brent, but for the week, both contracts were down about 1 per cent, their first in three weeks.
The US Senate approved a bipartisan deal to suspend the limit on the government debt ceiling, following approval in the House of Representatives, staving off a default that would have affected the markets.
Also, employment in the world’s largest economy increased more than expected in May, but a moderation in wages could allow the US Federal Reserve to skip a rate hike this month for the first time in more than a year, which could support oil demand.
However, a jump in the unemployment rate to 3.7 per cent from 3.4 per cent in the prior month, a slowing in the pace of hourly wage growth, and a decline in hours worked indicate that the US central bank may go ahead with expected moves.
Oil traders will watch the June 4 meeting of OPEC+. The group in April announced a surprise production cut of 1.16 million barrels per day, but resulting price gains have been erased, and crude is trading below pre-cut levels.
Reports showed that OPEC+ could also be debating an additional oil production cut among possible options.
According to Reuters, three OPEC+ sources said cuts were being discussed among options for Sunday. The sources said cuts could amount to 1 million barrels per day on top of existing cuts of 2 million barrels per day and voluntary cuts of 1.6 million barrels per day that were announced in a surprise move in April.
The oil ministers of the 23-nation alliance will gather at 2 p.m. in Vienna (1 p.m. Nigerian time). Before then, OPEC ministers will meet at 11 a.m. (10 a.m.) on Saturday.
On the demand side, manufacturing data out of China, the world’s second-biggest oil consumer, painted a mixed picture.
In the US, energy firms this week slashed the number of oil rigs operating by the most since September 2021, reducing the overall count for a fifth week in a row, energy services firm Baker Hughes Co. said.