26-5-2023 Oil prices remained relatively steady in early trading on Friday as investors eagerly awaited clarity regarding the upcoming oil policy decisions of OPEC and its allies. Conflicting messages from key figures have made it challenging to predict the outcome of the meeting scheduled for next week.
At 0022 GMT, Brent crude experienced a slight decline of 4 cents, settling at $76.22 per barrel, while U.S. West Texas Intermediate saw a modest increase of 9 cents, or 0.1 percent, reaching $71.92 per barrel.
On Thursday, benchmark prices had dropped by over $2 per barrel after Russian Deputy Prime Minister Alexander Novak downplayed the likelihood of further production cuts by OPEC+ at the Vienna meeting on June 4. Additionally, Russian President Vladimir Putin indicated that energy prices were approaching levels that were “economically justified,” suggesting that there might not be an immediate adjustment to the group’s production policy.
These remarks contrasted with statements made earlier in the week by Saudi Arabian Energy Minister Prince Abdulaziz bin Salman, the de-facto leader of OPEC, who warned short sellers to be cautious. Some investors interpreted this as a signal that OPEC+ might consider implementing additional output cuts.
Market attention also remained focused on the U.S. debt talks, as U.S. President Joe Biden and top congressional Republican Kevin McCarthy appeared to be nearing a deal aimed at reducing spending and raising the debt ceiling.
The strengthening of the U.S. dollar continued to put pressure on oil prices, with the dollar gaining ground for the fifth consecutive session against a basket of major currencies. Despite an aggressive rate hike cycle by the Federal Reserve, recent U.S. data indicated a resilient economy. A stronger dollar makes dollar-denominated commodities more expensive for holders of other currencies, consequently dampening demand.
Furthermore, comments from Federal Reserve officials have revealed divisions within the institution regarding whether to continue raising interest rates or not. The likelihood of a 25 basis point rate hike by the Fed at its June meeting has increased according to market speculation.
