Brent falls on lingering concerns over US debt ceiling

The front-month ICE Brent contract has plummeted by $1.1/bbl on the day, to $76.4/bbl at 09.00 GMT.

PHOTO: Oil production and extraction in Russia. Getty Images

Upward pressure:

Russian Deputy Prime Minister Alexander Novak’s comments have lent some support to Brent futures. Novak expects Brent to climb above $80/bbl by the end of this year aided by a potential increase in oil demand in the summer, Russia’s state-owned news agency TASS has reported.

Meanwhile, Novak has also backtracked on his comments refuting any production cuts in June, following investors' concerns that the Saudi-Russian dispute could break up OPEC+, says Ed Moya, senior market analyst at OANDA.

"Russia and OPEC+ will make a decision on what is best for oil market, adding that OPEC+ can make a decision at the June meeting, if necessary," says Moya quoting Novak.

On the other hand, US crude oil inventory weekly decline by 12.46 million bbls coupled with the decline in weekly US oil rig count has raised concerns about a supply shortage amidst expected oil demand growth in summer. 

Downward pressure:

Concerns about a stronger US dollar and approaching deadline for the US debt ceiling have put downward pressure on Brent. A US debt default could cripple the US economy and have a negative impact on other global economies.

US lawmakers continued talks about extending the US debt ceiling as they struggle to find a middle ground. "Fitch Ratings has placed the country’s AAA credit rating on watch, a sign of growing unease about the nation’s ability to avoid a default," says ANZ commodity strategist Daniel Hynes.

By Aparupa Mazumder and Konica Bhatt

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