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Oil Drops Nearly 3%, Russia Doubts the Additional OPEC+ Cuts

by Didimax Team

Oil prices fell down in the market after Russian Deputy Prime Minister, Alexander Novak, played down the prospect of further OPEC+ production cuts at a meeting next week.

The Brent crude futures fell by $2.03, or 2.6%, to $76.33 a barrel. Meanwhile, the United States West Texas Intermediate (WTI) crude fell by $2.10, or 2.8% lower to the level of $72.24.

Before, the Top OPEC+ producers shared the series of conflicting messages related to oil policy's next action. This situation was making it very difficult to predict the outcome of the next meeting.

The Saudi Arabia's energy minister on Tuesday warned about this situation and it supported the oil. He warned that short-sellers betting oil prices would fall and that should be "cautious".


Further Cuts may Be Done on June 4

Some market participants took that as a signal that the Organization of the Petroleum Exporting Countries (also known as OPEC) and its allies including Russia, that is called OPEC+, may decided to do a further production cuts at a meeting on June 4.

Only one week before prince Abdulaziz's comments, Vladimir Putin as the president of Russia said oil production cuts were needed in order to manage certain price levels. 

Uncertainty over the US debt ceiling also weighed on prices of this commodity so far. Elsewhere, Gold prices experienced selling pressure and fell to their lowest level.

That was happened since the late March just below $1,945 before rebounding. It was not shocking for some analysts since that has been predicted before. 

GDP Grows by 1.3%

The American Bureau of Economic Analysis announced that it revised its annual Gross Domestic Product (GDP) growth for the first quarter to 1.3% from a previous estimate of 1.1%.

In addition, the United States labor Department's weekly report revealed that there were 229,000 initial claims for unemployment benefits in the week ended May 20.

That number was much lower than market expectations of 245,000. Encouraged by the release of upbeat macroeconomic data, the yield on 10-year US Treasury bonds rose almost 1%.

It reached 3.8% for the first time since the second week of March and somehow weighing on XAU/USD. That is why; the analysts suggest market participants to prepare several strategies. 

The Fed Rate can be Changed in June

According to the CME Group FedWatch Tool, markets currently assess a less than 60% probability of the Federal Reserve Of America for keeping its policy rate unchanged in June. 

This number is less than compared to nearly 80% earlier this week. Market participants will also continue to pay close attention to new developments surrounding debt limit negotiations that are approaching the deadline.

Before, Dollar cureency reached the two-month high against major currencies as an impact of the lack progress in increasing the American debt limit. It was dampened investors' appetite for risk-taking.

The American representatives and congressional Republicans finished one more talk of debt ceiling. Unfortunately, there was no sign of progress as the deadline to raise the government's borrowing limit by $31.4 trillion or the risk of default approaches.

Better Economic Data Supports the Greenback

While most market participants expect a deal eventually, the delay to finalizing it makes the traders quite nervous. It was said by Doyle some days ago in an event. 

Meanwhile, the economic data that was better and hawkish statement from regional Fed president gave a sign of the further rate hikes. These are included the James Bullard and Neel Kashkari.

This condition is supporting the greenback. The dollar index, which measures the United States currency against major currencies, hit 103.65.

In fact, it was the highest levek since March 20, and was last at 103.55. The greenback also higher and reached the level of 138.91 against the Japanese yen. It becomes the highest level since November before falling back to 138.57.



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