Russia's Rejection of Production Cuts Causes Oil to Drop
- 26-May-2023 3:30 PM
- Journalist: Bob Duffler
Vienna, Austria: Oil prices experienced a significant drop on Tuesday after Russia cast doubt on the possibility of another OPEC+ production cut. As a result, the Organization of Petroleum Exporting Countries and its allies are not expected to take any new measures. According to our sources oil settle below $72 per barrel, wiping out earlier gains that were prompted by a warning from Saudi Arabia to oil market short sellers.
According to sources oil prices saw a brief surge, providing a temporary insulation from the broader market sentiment that was affected by the debt ceiling turmoil in Washington. However, the stronger dollar on Thursday resulted in magnified losses for crude. The volatile behaviour of crude oil is akin to that of a toddler, swinging from high to low quickly and unpredictably, often basing its reactions on emotions rather than reason.
Crude futures have experienced a decline of approximately 9% so far this year. This can be attributed to the muted economic rebound in China, as well as tighter monetary policy in the US, which have both contributed to lower prices. Federal Reserve officials are considering halting interest rate hikes in June, while indicating that their efforts to combat inflation will continue. Our analysis has questioned previous forecasts for oil demand growth, as several indicators suggest that such growth is unlikely to be realized.