Concerns about rising interest rates are capping oil’s gains
29 May 2023 - 12:02
byNoah Browning
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London — Oil prices were steady on Monday after US leaders reached a tentative debt ceiling deal, possibly averting a default in the world’s largest economy and oil consumer but concerns about further interest rate hikes capped gains.
Brent crude futures climbed 14c, or 0.2%, to $77.09 a barrel by 0905 GMT, while US West Texas Intermediate crude was at $72.88 a barrel, up 21c, or 0.3%.
Trade is expected to be subdued on Monday because of UK and US holidays.
US President Joe Biden and House Speaker Kevin McCarthy at the weekend forged an agreement to suspend the $31.4-trillion debt ceiling and cap government spending for the next two years. Both leaders expressed confidence that members of the Democratic and Republican parties will vote to support the deal.
Reaching the agreement and coming closer to avoiding a default on US debt renewed investor appetite for riskier assets such as commodities.
Analysts said the provisional deal has taken pressure off the markets, offering a relief rally in risk assets, including crude oil.
“We could see more gains as a relief rally gets under way in the broader financial markets when the US comes back from the long Memorial Day weekend,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.
Still, analysts see any boost in oil prices from the debt deal as short-lived.
The US Federal Reserve may still raise interest rates in June, IG’s Sydney-based analyst Tony Sycamore said: “Higher US rates are a headwind for crude oil demand,” he added.
Meanwhile, Opec and allies including Russia, known as Opec+, is due to meet on June 4.
Saudi energy minister Abdulaziz bin Salman warned short-sellers betting that oil prices will fall to “watch out”, in a possible signal that Opec+ may further cut output.
However, comments from Russian oil officials and sources, including Deputy Prime Minister Alexander Novak, indicate the world’s third-largest oil producer is leaning towards leaving output unchanged.
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 steady as US reaches tentative debt deal
Concerns about rising interest rates are capping oil’s gains
London — Oil prices were steady on Monday after US leaders reached a tentative debt ceiling deal, possibly averting a default in the world’s largest economy and oil consumer but concerns about further interest rate hikes capped gains.
Brent crude futures climbed 14c, or 0.2%, to $77.09 a barrel by 0905 GMT, while US West Texas Intermediate crude was at $72.88 a barrel, up 21c, or 0.3%.
Trade is expected to be subdued on Monday because of UK and US holidays.
US President Joe Biden and House Speaker Kevin McCarthy at the weekend forged an agreement to suspend the $31.4-trillion debt ceiling and cap government spending for the next two years. Both leaders expressed confidence that members of the Democratic and Republican parties will vote to support the deal.
Reaching the agreement and coming closer to avoiding a default on US debt renewed investor appetite for riskier assets such as commodities.
Analysts said the provisional deal has taken pressure off the markets, offering a relief rally in risk assets, including crude oil.
“We could see more gains as a relief rally gets under way in the broader financial markets when the US comes back from the long Memorial Day weekend,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.
Still, analysts see any boost in oil prices from the debt deal as short-lived.
The US Federal Reserve may still raise interest rates in June, IG’s Sydney-based analyst Tony Sycamore said: “Higher US rates are a headwind for crude oil demand,” he added.
Meanwhile, Opec and allies including Russia, known as Opec+, is due to meet on June 4.
Saudi energy minister Abdulaziz bin Salman warned short-sellers betting that oil prices will fall to “watch out”, in a possible signal that Opec+ may further cut output.
However, comments from Russian oil officials and sources, including Deputy Prime Minister Alexander Novak, indicate the world’s third-largest oil producer is leaning towards leaving output unchanged.
Reuters
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