Legislation negotiated by President Joe Biden and House Speaker Kevin McCarthy to raise the US debt ceiling by $31.4 trillion cleared a significant hurdle as it was approved by the Rules Committee and sent to the whole House for discussion and vote expected on Wednesday. Dealers await an expected vote on a deal to raise the US debt ceiling by $31.4 trillion.
The price change
Brent crude futures for August delivery fell 23 cents to $73.31 a barrel at 0307 GMT, while U.S. West Texas Intermediate crude fell 28 cents to $69.18 a barrel, erasing its gains in the first session after the release of data on China’s industrial sector, both of which fell more than 4% on Tuesday.
The Brent contract for July, which ends Wednesday, and US crude are heading for monthly losses of more than 7% and 9%, respectively.
Manufacturing activity in China contracted faster than expected in May due to weaker demand, with the official manufacturing Purchasing Managers’ Index (PMI) falling to 48.8 from 49.2 in April. The data came in below expectations at 49.4.
“With China’s industrial production and capital investment growth slower than expected last month, markets are concerned that China’s demand for raw materials will weaken faster than expected,” said Vivek Dar, director of commodity research at the Commonwealth Bank of Australia.
“The current pessimism surrounding China’s demand for raw materials contrasts with the optimism that prevailed earlier this year,” he added.
The U.S. debt repayment deadline roughly coincides with the meeting of the Organization of the Petroleum Exporting Countries and its allies, including Russia, in the so-called OPEC+ bloc, on June 4. It is not yet clear whether the bloc will increase production cuts as lower prices weigh on the market.
Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman last week called on short-sellers betting on falling oil prices to be “cautious”, a possible sign that OPEC+ could cut production.
However, statements from Russian oil officials and sources, including Deputy Prime Minister Alexander Novak, indicate that the world’s third-largest oil producer tends to leave output unchanged.
And in April, Saudi Arabia and other OPEC+ members announced further voluntary oil production cuts of around 1.2 million barrels per day, bringing the bloc’s total volume of cuts to 3.66 million barrels per day, according to Reuters calculations.
Traders are also awaiting industry data on U.S. crude inventories, due later Wednesday.
Seven analysts polled by Reuters estimated that crude oil inventories fell by around 1.2 million barrels in the week ending May 26.
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