Oil rises amid optimism about America’s debt ceiling and demand

Oil rises amid optimism about America’s debt ceiling and demand

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the date : 2023-05-18 (11:28 AM)

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| by: Abdel Khalek Kamel

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Oil prices rose nearly $2 a barrel when they settled on Wednesday, as optimism about oil demand and negotiations to raise the US debt ceiling outweighed supply concerns.

Brent crude futures rose $2.05, or 2.7%, to settle at $76.96 a barrel. US West Texas Intermediate crude also rose $1.97, or 2.8 percent, to $72.83.

“Today’s strong oil trading is all about expectations of an agreement to (raise) the public debt ceiling, probably by the end of this week, which seems to have lifted a negative burden on most asset classes, including oil.”

US President Joe Biden and Republican Congressional Leader Kevin McCarthy stressed Wednesday their intention to reach an agreement soon to raise the federal government’s debt ceiling of $31.4 trillion and avoid the government’s default on its obligations, which could lead to catastrophic repercussions.

After a crisis that lasted for months, the president of the Democratic Party and the Speaker of the House of Representatives agreed on Tuesday to negotiate directly. An agreement must be reached and approved by both chambers of Congress before the federal government runs out of funds by a date that could be June 1.

This optimism was overshadowed by the impact of the increase in US crude oil inventories by five million barrels in the week ending May 12, as announced by the US Energy Information Administration. Analysts had expected, in a Reuters poll, a decline of 900 thousand barrels.

The increase in crude stocks added to concerns about growth in the United States, after data showed that retail sales rose 0.4 percent in April, which was below expectations for a 0.8 percent rise.

The International Energy Agency expected, on Tuesday, that oil demand will exceed supply by 2 million barrels per day in the second half of the year, and that China will account for about 60 percent of oil demand growth in 2023.

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