While markets considered the possibility of price-supportive OPEC+ production cuts over the weekend, oil prices rose on Friday as optimism grew following the passage of a US debt cap bill in Washington.
Brent crude futures rose 71 cents, or 0.96 percent, to USD 74.99 a barrel by 0600 GMT, while US West Texas Intermediate oil (WTI) rose 66 cents, or 0.94 percent, to USD 70.76 after falling for two days in a row.
The fact that Congress passed a bill to suspend the US government’s USD 31.4 billion debt cap and that the Federal Reserve had already hinted that it might stop raising interest rates helped to calm the markets.
The Senate passed the bill on Thursday night (US time), preventing a disastrous sovereign failure that would have shook financial markets around the world.
The Energy Information Administration’s report on US crude stocks on Thursday showed that crude imports went up last week. This made the market feel better.
Investors are now focused on a meeting on June 4 between the Organization of the Petroleum Exporting Countries (OPEC) and its partners, including Russia. This group is called OPEC+.
Ministers from the main oil-producing countries will decide if they need to cut production even more to help their governments get more money.
After the unexpected cut of 1.16 million barrels per day in April, it would be good for oil prices if OPEC+ cut production even more.
There have been mixed signs about this, with Reuters and experts from banks like HSBC and Goldman Sachs saying that more cuts are unlikely and that the bloc will “wait and see” what happens.
Other market watchers have said that weak factory data from China and the US makes it more likely that OPEC+ will cut production.
A senior market analyst at OANDA, Edward Moya, said, “Oil prices are stabilizing after a set of disappointing data on global manufacturing made the case for OPEC+ to cut production again.”
The Institute for Supply Management (ISM) said on Thursday that the manufacturing PMI in the US dropped to 46.9 in May from 47.1 in April. This is the seventh month in a row that the PMI has stayed below 50, which means that manufacturing activity in the country that uses the most oil is going down.
China’s manufacturing data showed a mixed picture. Thursday’s Caixin/S&P Global China manufacturing PMI was better than expected, but the day before, official government data showed that factory production in May was at its lowest level in five months.
Traders, on the other hand, “think that Russia might not stick to a hard stance on output cuts, especially since they are having trouble sticking to their quotes,” Moya said.