Oil surges after US leaders reach a temporary debt deal. After U.S. officials negotiated a tentative debt ceiling compromise on Monday, oil prices jumped, but concerns about more interest rate hikes restrained gains.
By 0247 GMT, Brent crude futures rose 66 cents, or 0.9%, to $77.61, while U.S. West Texas Intermediate crude rose 75 cents, or 1%, to $73.42. U.K. and U.S. vacations will likely slow trade on Monday.
President Joe Biden and House Speaker Kevin McCarthy reached a deal Saturday to suspend the $31.4 trillion debt ceiling and cap federal spending for two years. On Sunday, both leaders predicted Democratic and Republican backing for the pact.
The agreement increased investor appetite for riskier assets like commodities.
“The tentative debt deal offered relief rally in risk assets, including crude oil,” said CMC Markets analyst Tina Teng.
Brent and WTI increased again last week by over 1%.
Prices rose as Saudi energy minister Abdulaziz bin Salman advised short-sellers to “watch out” for pain.
Bin Salman’s warning suggested that OPEC+, which includes Russia, may cut output when they meet on June 4.
Russian oil officials and sources, including Deputy Prime Minister Alexander Novak, suggest the world’s third-largest oil producer may maintain output.
Analysts expect the debt agreement to raise oil prices temporarily.
Tony Sycamore, I.G.’s Sydney-based analyst, said the rally’s longevity is uncertain because the U.S. Federal Reserve may boost interest rates in June after their preferred inflation index jumped more than predicted for April.
“Higher U.S. rates are a headwind for crude oil demand,” he noted.
China, the world’s largest oil importer, will release manufacturing and services statistics this week, as will the U.S. on Friday.
Teng said China’s shaky economic rebound is hurting oil prices.
As energy corporations remove rigs for a fourth week, U.S. oil production may drop. In its weekly report on Friday, energy services firm Baker Hughes Co (BKR.O) reported a five-rig drop to 570 oil rigs, the lowest since May 2022.
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