Oil Steadies After Early Drop With Ukraine, US Outlook in Focus
(Bloomberg) -- Oil steadied after an early drop, with talks to end the war in Ukraine and a lowering of the US credit rating in focus.
Brent fell as much as 1.1% to below $65 a barrel before recovering, while West Texas Intermediate traded near $62. President Donald Trump and Vladimir Putin will speak by phone on Monday, although the Russian leader may believe he has the upper hand in the fighting and therefore be unlikely to make concessions.
Late on Friday, Moody’s Ratings stripped the US government of its top credit rating, adding to concerns about the outlook for global growth. The downgrade, which trailed the other major rating agencies, risks reinforcing Wall Street’s growing worries over the US sovereign bond market and a slowing economy.
Iran, meanwhile, won’t abandon its pursuit of civilian nuclear energy under any circumstances, President Masoud Pezeshkian said in aired remarks on state television. His comments come as the rhetoric between Iranian and US officials intensified in recent days.
“The oil market is in limbo, trying to balance what a US credit downgrade means, if anything, for oil, along with the uncertainty over how Iranian nuclear talks evolve,” said Warren Patterson, head of commodities strategy for ING Groep NV. Ukraine is also in focus, although “in the event of de-escalation and an easing of sanctions, any additional Russian oil supply would likely be limited, given that Russian oil flows have held up well.”
Crude prices rebounded over the previous two weeks on increased uncertainty over the progress of US-Iranian talks and following Israel’s strikes on Houthi-held areas of Yemen that have elicited promises of retaliation. Futures are still down more than 10% this year as Trump’s trade war threatens demand and OPEC+ returns shuttered production into a market that is forecast to be oversupplied later this year.
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