The price of the ICDX oil contract closed lower at $72.13 a barrel for the week ended May 26, amid concerns over talks of the US debt ceiling and the possibility of further hikes in US interest rates.
President Joe Biden and House Speaker Kevin McCarthy ended discussions May 22 with no agreement on how to raise the US government debt ceiling by $31.4 trillion and will continue to talk just 10 days before a possible US debt default. Treasury Secretary Janet Yellen said it was highly likely the Treasury would no longer be able to meet the government's obligations by June 1 if Congress did not suspend the debt limit. A US default is likely to trigger chaos in financial markets and spike interest rates, impacting fuel demand growth both domestically and globally. In addition, there are comments hawkish from the Fed official by saying US inflation continues to decline and it may still need to raise interest rates by another half percentage point this year.
In a report released on the evening of May 24 by the government statistics agency, the Energy Information Administration (EIA), showed US crude oil stocks in the week fell by 12.46 million barrels, outside of initial predictions that predicted stocks would rise by 775 thousand barrels, which also marked the biggest drop since November last year. Gasoline stocks also decreased by 2.05 million barrels, far greater than the initial prediction that stocks would fall by 1.05 million barrels. The EIA report indicates strong demand in the US energy market.
Global Production Cut Agreement
Saudi Arabia is seen making a massive production cut of around 1 million per barrel in July, its biggest cut in years amid a broader OPEC+ deal to limit supply until 2024. Keep in mind, OPEC+ has already made 3 cuts. .66 million bpd, amounting to 3.6% of global demand, including the 2 million bpd agreed last year and the voluntary cuts of 1.66 million bpd agreed in April. The cuts of 3.66 million barrels per day are valid until the end of 2023 and on Sunday, OPEC+ has reached a new agreement by extending until the end of 2024 coupled with reducing the overall production target from 2024 by a further total of 1.4 million barrels per day ( bpd) and agreed on a new production target of 40.46 million barrels per day (million barrels/day) starting in 2024.
USA - API Crude Oil Stock Change
USA - EIA Crude Oil Stocks Change
USA - Non Farm Payrolls