US President Joe Biden and House Speaker Kevin McCarthy reached an agreement in principle to suspend the government’s debt ceiling of $31.4 trillion. Both said they were confident Sunday that Democratic and Republican members of the House and Senate would support the deal.
CMC Markets analyst Tina Teng said the initial US debt deal helped risky assets, including crude oil, rebound, noting that China’s bumpy economic recovery is weighing on oil markets.
But markets may only breathe a sigh of relief for a while as once the deal is approved, the US Treasury is expected to issue bonds that will further tighten liquidity and increase the cost of funding for companies already struggling due to high interest rates.
For his part, IG analyst Tony Sycamore views the sustainability of higher oil prices as questionable as there is a greater chance that the US Federal Reserve will raise interest rates in June after their preferred measure of inflation rose more than expected for the month of April.
He added, “High interest rates in the United States are a headwind to demand for crude oil.”
And some investors remain cautious in light of indications that the OPEC+ group, which includes the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, may consider implementing additional production cuts when of its meeting to be held on June 4.
Investors are also eagerly awaiting data on China’s manufacturing and services sectors this week, as well as US nonfarm payrolls data on Friday, looking for indicators of economic growth and labor demand. oil.
It should be noted that oil production growth in America, the world’s largest producer, could slow as US energy companies cut their rigs for the fourth week. Energy services company Baker Hughes, announced in its latest weekly report, Friday, that the number of oil rigs in operation fell by five rigs to 570 rigs last week, the lowest level since May 2022.
At 03:31 GMT, Brent crude futures were up 61 cents, or 0.8%, at $77.56 a barrel, and West Texas Intermediate crude futures were up 68 cents, or 0.9%, to $73.34 a barrel, according to Reuters data.
Last week, Brent and West Texas Intermediate rose more than 1% for the second week in a row.
