(Reuters) – Oil prices fell on Monday as economic concerns about further interest rate hikes outweighed an interim debt ceiling agreement reached in the United States, which could avert a default in the world’s largest economy and oil consumer.
Brent crude futures fell 68 cents, or 0.8 percent, to $76.27 a barrel by 1350 GMT, while US West Texas Intermediate crude was $72.11 a barrel, down 56 cents, or 0.7 percent.
Trade is expected to subside on Monday due to public holidays in the United Kingdom and the United States.
Over the weekend, US President Joe Biden and House Speaker Kevin McCarthy drafted an agreement to suspend the $31.4 trillion debt ceiling and limit government spending for the next two years. The two leaders expressed confidence that members of the Democratic and Republican parties would vote in support of the agreement.
Analysts, however, saw any increase in oil prices from the debt deal as short-term, with earlier gains now in session erased.
IG analyst Tony Sycamore said: He added, “High US prices are a headwind to the demand for crude oil.”
Markets are leaning toward expecting the Fed to raise interest rates by 25 basis points next month, and then hold rates steady for the rest of the year.
Chinese stocks fell after data showed a drop in profits for Chinese industrial companies.
Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known as OPEC+, are scheduled to meet on June 4.
Saudi Energy Minister Abdulaziz bin Salman warned short sellers who bet that oil prices will fall to “be careful,” in a possible sign that OPEC+ may cut production further.
However, statements by Russian oil officials and sources, including Deputy Prime Minister Alexander Novak, indicate that the world’s third largest oil producer is leaning towards leaving production unchanged.
“Traders are left scratching their heads as to what to expect,” said Craig Erlam, chief market analyst at OANDA.
“Maybe Saudi Arabia wants to keep traders on their toes, but making these comments and not following through could be seen as soft and see prices drift lower again,” Erlam said.
Additional reporting by Florence Tan in Singapore and Mohi Narayan in New Delhi; Editing by Kirsten Donovan and David Holmes
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