Oil falls amid risk-off mood and doubts of further OPEC+ curbs

Brent oil declined with other commodities as a risk-off tone in Asia took hold amid growing doubts that OPEC+ will cut production at its meeting next month.

The global benchmark traded near $76 a barrel, after a key gauge of Chinese stocks reflected economic sluggishness, overshadowing progress in the US toward a debt-ceiling agreement.

“Oil prices continue to be very sensitive to any data that suggests the global economy is struggling to show growth,” Alpha Energy said in a research note.

Crude prices have dropped about 12% this year due to factors including China’s lackluster recovery from its Covid Zero policy and concerns about aggressive monetary policy in the US. Within the OPEC+ coalition, top producers Saudi Arabia and Russia have given conflicting signs on the outcome of the group’s June 3-4 meeting.

Saudi Energy Minister Prince Abdulaziz bin Salman last week said oil short-sellers should “watch out,” while Russia has said OPEC+ is unlikely to take any further measures at its meeting.

“The oil market seems to be pretty focused on what seems to be a fallout between Saudi Arabia and Russia,” said Arne Lohmann Rasmussen, head of research at A/S Global Risk Management Ltd. “After the Russian comment, any belief they could actually cut production in June has gone out the window.”

While Russia has previously pledged to reduce output, its crude oil flows to international markets show no substantive sign of the curbs, according to tanker-tracking data compiled by Bloomberg. Meanwhile, the country aims to boost its daily diesel exports from key western ports by nearly a third in June, as some refineries resume full operations following seasonal maintenance.

Brent will hover between $72 and $78 a barrel “until recession is apparent or a catalyst pushes markets higher” Joe DeLaura, senior energy strategist at Rabobank, said in a research note. Further gloomy economic news, such as another bank failure or financial contagion, could push prices lower into the $65-$70 range, he added.

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