NNA - Oil prices were down in morning trading on Tuesday amid fears of further interest rate increases and concerns that Opec+ will not change its output policy at a coming meeting.
Brent, the benchmark for two thirds of the world’s oil, was trading 0.56 per cent lower at $76.64 a barrel at 10.43am UAE time. West Texas Intermediate, the gauge that tracks US crude, was down 0.32 per cent at $72.44 a barrel.
On Monday, Brent settled 0.16 per cent higher at $77.07 a barrel. There was no trading in WTI futures overnight as markets were closed the Memorial Day holiday in the US.
“Another month of strong US jobs data and solid wage growth should further fuel the [US Federal Reserve] rate hike bets and support the dollar,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
In March, the central bank raised interest rates by a quarter of a percentage point and indicated that it may pause future increases after the collapse of three major US banks triggered fears of a new financial crisis.
Rising interest rates limit economic growth and strengthen the dollar, making oil more expensive for holders of other currencies.
The US Dollar Index – a measure of the value of the greenback against a weighted basket of major currencies – has gained more than 2 per cent over the last month. It was up 0.20 per cent at 104.42 on Tuesday.
Oil prices were up earlier in the day on optimism over the US debt deal.
US President Joe Biden and Kevin McCarthy, the Republican Speaker of the House, reached a provisional agreement late on Saturday to suspend the federal government's $31.4 trillion debt ceiling.
Congress must now approve a package that includes spending cuts to avert a disastrous default after the White House agreement was reached “in principle”.
“Presently, it feels like investors are confident that the US debt ceiling will be raised. The knee-jerk reaction to a debt ceiling deal will be positive but gains could remain short-lived as most of the deal is already priced in,” Ms Ozkardeskaya said.
Daniel Richards, Mena economist at Emirates NBD, said energy markets will be looking ahead to the Opec+ meeting on June 4 for signals on where crude prices will head in the short term.
The oil producer's group will meet as Brent futures trade well below $80 a barrel despite the announcement of an output cut by some members last month.
The international benchmark has lost more than 11 per cent of its value since the beginning of the year as weak economic growth in the US and China weigh on the outlook for fuel demand.
Last week, Saudi Arabia's Energy Minister told oil market short sellers to “watch out”, which was seen by some traders as a signal for further output reductions.
“I keep advising them that they will be 'ouching'. They did 'ouch' in April,” said Prince Abdulaziz bin Salman during an event in Qatar.
However, Russian Deputy Prime Minister Alexander Novak later said he expected no new steps from Opec+, Reuters reported, citing his interview with Russian daily Izvestia.--agencies