US oil prices dropped below $70 a barrel Tuesday on concerns about whether the debt ceiling deal will make it through Congress and on reports of tensions between Saudi Arabia and Russia ahead of a key OPEC+ meeting.
Crude slumped 4.4% to close at $69.46 a barrel, the lowest settlement price in nearly four weeks.
The selloff marks one of the worst days of the year for the oil market and could help keep a lid on pump prices. The national average for a gallon of regular gasoline is down by about $1 from a year ago.
Oil market veterans blamed Tuesday's decline in part on worries about whether conservatives in the House of Representatives will try to block the bipartisan deal to raise the debt ceiling forged over the weekend by President Joe Biden and House Speaker Kevin McCarthy.
"It's not a layup that the debt deal is going to get done. That's spooking the market, no doubt about that," said Robert Yawger, vice president of energy futures at Mizuho Securities.
Patrick De Haan, head of petroleum analysis at GasBuddy, also pointed to "growing skepticism" about the debt ceiling agreement and the risk that a failure to raise the borrowing limit sets off a "deep recession" that curbs demand for oil.
Treasury Secretary Janet Yellen has warned the government will not have enough funds to meet all of the nation's obligations if Congress does not address the debt ceiling by June 5.
Brent crude, the world benchmark, dropped by more than 4%, slipping below $74 a barrel.
Meanwhile, there are new questions about the relationship between OPEC leader Saudi Arabia and Russia ahead of this weekend's meeting of oil producers in Vienna.
Saudi Arabia has expressed anger to Russia for failing to follow through on Moscow's promise to cut production in response to Western sanctions, the Wall Street Journal reported, citing sources. The apparent tensions raises uncertainty about the status of OPEC+, the alliance between OPEC members like Saudi Arabia, the United Arab Emirates and Kuwait and non-OPEC nations led by Russia.
"There is starting to be chatter about the Russian and Saudis not being the best of friends," said Yawger.
