Oil dips as markets await clarity on US debt-ceiling talks
Despite previous gains from high US fuel demand, oil prices fell in early Thursday trade, influenced by uncertainty about the impending US debt-ceiling deal and potential rate hikes
18 May 2023 - 07:31
byStephanie Kelly and Sudarshan Varadhan
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Oil prices fell in early Asian trade on Thursday as traders warily watched for signs of progress on talks to raise the US debt ceiling, after surging nearly 3% in the previous session on optimism over US fuel demand.
Brent crude futures dipped 20c, or 0.3%, to $76.76 a barrel at 2.28am GMT. US West Texas Intermediate (WTI) crude also dropped 20c to $72.63 a barrel.
A sharp plunge in US gasoline inventories due to demand surging to the highest levels since 2021 and optimism surrounding negotiations over the US debt ceiling helped the main crude benchmarks settle more than $2 higher on Wednesday.
President Joe Biden and top US congressional Republican Kevin McCarthy on Wednesday underscored their determination to reach a deal soon to raise the federal government’s $31.4-trillion debt ceiling and avoid an economically catastrophic default.
On Thursday, investors were “awaiting further evidence that a deal will happen soon,” said Edward Moya, an analyst at Oanda.
“Crude needs a clear signal that the US economy will avoid economic catastrophe or that China’s recovery is picking up steam,” he said.
Also weighing on prices was the increased probability of a rate hike by the US Federal Reserve.
The strength of April economic data in the US, in addition to improving optimism about the debt ceiling negotiations and the health of regional banking stocks overnight, have strengthened market expectations of a further hike, ANZ Research said in a note on Thursday.
After a months-long standoff, Biden and McCarthy on Tuesday agreed to negotiate directly. A debt agreement needs to be reached and passed by both chambers of Congress before the government runs out of money to pay its bills, which could be as soon as June 1.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Oil dips as markets await clarity on US debt-ceiling talks
Despite previous gains from high US fuel demand, oil prices fell in early Thursday trade, influenced by uncertainty about the impending US debt-ceiling deal and potential rate hikes
Oil prices fell in early Asian trade on Thursday as traders warily watched for signs of progress on talks to raise the US debt ceiling, after surging nearly 3% in the previous session on optimism over US fuel demand.
Brent crude futures dipped 20c, or 0.3%, to $76.76 a barrel at 2.28am GMT. US West Texas Intermediate (WTI) crude also dropped 20c to $72.63 a barrel.
A sharp plunge in US gasoline inventories due to demand surging to the highest levels since 2021 and optimism surrounding negotiations over the US debt ceiling helped the main crude benchmarks settle more than $2 higher on Wednesday.
President Joe Biden and top US congressional Republican Kevin McCarthy on Wednesday underscored their determination to reach a deal soon to raise the federal government’s $31.4-trillion debt ceiling and avoid an economically catastrophic default.
On Thursday, investors were “awaiting further evidence that a deal will happen soon,” said Edward Moya, an analyst at Oanda.
“Crude needs a clear signal that the US economy will avoid economic catastrophe or that China’s recovery is picking up steam,” he said.
Also weighing on prices was the increased probability of a rate hike by the US Federal Reserve.
The strength of April economic data in the US, in addition to improving optimism about the debt ceiling negotiations and the health of regional banking stocks overnight, have strengthened market expectations of a further hike, ANZ Research said in a note on Thursday.
After a months-long standoff, Biden and McCarthy on Tuesday agreed to negotiate directly. A debt agreement needs to be reached and passed by both chambers of Congress before the government runs out of money to pay its bills, which could be as soon as June 1.
Reuters
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