Crude oil down; Returning Some Debt Ceiling-Inspired Gains

Investing.com — Oil prices fell slightly on Thursday, giving back some of the previous session’s big gains, as concerns about U.S. economic growth prompted cautious trading.

At 9:05 a.m. ET (1:05 p.m. GMT), U.S. crude futures were trading 0.8% lower at $72.23 a barrel, while the Brent contract was down 0.8% at $76.33. the barrel.

Both benchmarks climbed Wednesday on optimism that President Joe Biden and top Republican in the U.S. Congress Kevin McCarthy can reach a deal to raise the federal government’s $31.4 trillion debt ceiling. dollars and avoid a payment default which would have a catastrophic economic impact on the global economy.

Yet nothing has been signed and a deal must be reached and passed by both houses of Congress before the government runs out of money, which Treasury Secretary Janet Yellen has warned could happen as soon as June 1st.

“There was a risk-on trend in markets yesterday, with growing optimism that a deal on the US debt ceiling could be reached,” ING analysts said in a note. “The oil market continues to be driven by external developments rather than fundamentals. »

Despite yesterday’s gains, the crude market is down about 8% from last month, with monetary tightening in the United States and lackluster economic growth in China weighing on the demand outlook.

Data released Thursday showed that the number of people filing new claims for U.S. unemployment benefits fell more than expected last week, suggesting that the job market remains quite strong despite prolonged monetary tightening. the Federal Reserve.

This, coupled with hawkish comments from a number of Fed officials and continued high prices, adds to fears that the US central bank may agree to another interest rate hike.

Inflation is “far too high” and has not yet subsided quickly enough to allow the Fed to suspend its interest rate hike campaign in June, according to Dallas Federal Reserve President Lorie Logan , THURSDAY.

Traders estimate there is about a 20% chance the Fed will raise rates at its June meeting, down from a month ago when they expected a roughly 20% chance of a rate cut.

That helped the U.S. dollar rise to a near seven-week high, making oil, denominated in dollars, more expensive for holders of other currencies.

Additionally, U.S. crude inventories rose by 5 million barrels last week, the largest increase since mid-February, government data showed Wednesday.

Crude oil down; Returning Some Debt Ceiling-Inspired Gains

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