Crude oil fell 4.3% on Tuesday as a sign of the tensions and mixed signals sent by the US debt ceiling agreement.
Will it fall even more?
According to the latest data, the US debt ceiling is proving to be an obstacle for the market to rise.
US Debt Ceiling Jitters:
The US debt ceiling has been sending lots of mixed messages from major producers and has been closing the supply outlook ahead of the OPEC+ meeting to be held this weekend.
As tensions brew and continue to unfold in the US parliament, several determinate Republican lawmakers said on Monday that they might oppose the deal that would raise the Debt ceiling in the US. Considered the world’s largest oil consumer, the US’s concerns about the debt ceiling have not ended.
Democratic President Joe Biden and the Republican House of Representatives, Mr Kevin McCarthy have suggested remaining optimistic. They have an assurance that the deal would come to fruition.
Amidst this, PVM Oil’s Tamas Varga said “There could be a potential default that could lead to catastrophic economic repercussions domestically as well as globally. This would lead to an adverse impact on the oil demand.”
All of these issues pose a risk to crude oil, and traders could see fluctuations in the prices of crude oil this week.
OPEC+ Meeting, June 4th:
Additionally, the debt deadline overlaps with the June 4th meeting of the Organization of the Petroleum Exporting Countries(OPEC) and its allies. It includes a big exporter, Russia. There is concern surrounding the output cuts amidst a recent slump in prices that also weigh on the market.
Several comments from officials of the countries that are part of OPEC have arrived.
The Saudi Arabian Energy Minister, Abdulaziz bin Salman quoted last week, warning short sellers that the price of oil might fall due to the OPEX+ cutting their output.
From another part of the World, Russian officials, including Deputy Prime Minister Alexander Novak spoke. Russia indicates that the 3rd largest oil producer is on the verge of leaving the output unchanged.
In April, the Middle East, Saudi Arabia and other members of OPEC+ announced further oil output cuts of around 1.2 million barrels per day, bringing the total volume cuts by OPEC+ to 3.66 million bpd.
On May 31st, 2023 and on June 1st, 2023 China will be releasing its Manufacturing PMI, Non-Manufacturing PMI and Caixin Manufacturing PMI respectively. These numbers would also be scrutinized for cues on the fuel demand recovery in the world’s top oil importer.
Technical Outlook:
Crude oil fell 4.3% on Tuesday.
Since 25 May 2023, Crude oil turned lower and dropped more than 4%. Currently, prices drop more than 2% and are trading at 5912.00.
Prices failed to hold their massive resistance at 6210, coinciding with previous swing highs and continued trading downside.
On the above chart, prices are forming a head and shoulders pattern that’s yet to indicate bearishness. However, it would need to break below 5870 to test 5780-5700.
Alternatively, any short time rise towards 6050-6070 could attract selling activities. With stop loss above 6210.00
Commodity Samachar
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