Oil prices experienced a mild decline in early trading on Friday due to mixed messages from Russia and Saudi Arabia regarding the upcoming OPEC+ policy meeting, coupled with the strength of the dollar.
At 0315 GMT, Brent crude dropped by 30 cents, reaching $75.96 per barrel, while U.S. West Texas Intermediate saw a decrease of 14 cents, settling at $71.69 per barrel.
Yesterday, both benchmarks recorded a decline of over $2 per barrel following Russian Deputy Prime Minister Alexander Novak’s remarks that downplayed the likelihood of further production cuts during the OPEC+ meeting in Vienna on June 4.
Nonetheless, both prices were still poised to register a second consecutive week of gains, albeit slightly below 1%.
According to senior market analyst Edward Moya, “Crude prices are weakening as king dollar returns and after Russia slashes any Saudi hope of delivering another production cut at the June 4 meeting.”
Russian President Vladimir Putin recently stated that energy prices were approaching levels that were “economically justified,” suggesting no immediate alterations to the group’s production policy.
These statements contrasted with Saudi Arabian Energy Minister Prince Abdulaziz bin Salman’s comments earlier this week, where he cautioned short sellers to “watch out.” Some investors interpreted this as a potential indication that OPEC+ might consider additional output cuts.
Moya added, “OPEC+ watchers always pay close attention to Russia-Saudi communication as a rising rift could bring back the risk that the 23-nation alliance could fall apart.”
The stronger dollar, which has steadily strengthened for the fifth consecutive session against major currencies, added downward pressure to oil futures. U.S. data revealing a resilient economy, even after an aggressive rate hike cycle by the Federal Reserve, contributed to this trend.
A robust greenback makes dollar-denominated commodities more expensive for holders of other currencies, thereby reducing demand.
Market participants continued to monitor the U.S. debt negotiations, as President Joe Biden and top congressional Republican Kevin McCarthy appeared to be nearing a deal to cut spending and raise the debt ceiling.
On a positive note, May supplies from OPEC+ and Russia remained largely in line with the previous agreement for further output cuts.
According to JP Morgan analysts, OPEC+ members that had previously committed to production cuts have decreased their exports by 1.5 million barrels per day (bpd), while Russian exports have fallen by 400,000 bpd since their peak on April 25.
As of May 23, total exports from OPEC+ alliance producers were down 1.4 million bpd compared to the previous month, as stated in a note by JP Morgan analysts.
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