Oil prices rise weakly on Tuesday as traders continue to follow negotiations to raise the U.S. borrowing limit.
Negotiations between U.S. President Joe Biden and Republican House Speaker Kevin McCarthy on Monday were productive, according to both sides, but no agreement was reached. Meanwhile, the deadline for raising the debt ceiling is approaching: Treasury Secretary Janet Yellen said the day before that her agency’s funds are “highly likely” to run out in early June and possibly even by June 1.
“The pending national debt limit issue is taking a toll on the mood of oil traders,” said Ricardo Evangelista, chief analyst at ActivTrades.
“If the issue is not resolved soon, the U.S. Treasury will be left without funds and unable to meet its obligations, and this scenario could trigger a crisis whose scale is unpredictable,” Market Watch quotes the expert as saying.
The cost of July futures for Brent crude oil on London’s ICE Futures exchange is $76.13 a barrel by 8:15 a.m. on Tuesday, up $0.14 (0.18%) from the previous session’s closing price. Those contracts rose $0.41 (0.5%) to $75.99 a barrel on Monday.
The price of WTI futures for July oil grew by $0.16 (0.22%) up to $72.21 per barrel at electronic trades of NYMEX by that time. At the end of previous session the contracts value grew by $0.36 (0.5%) up to $72.05 per barrel.
Since the beginning of the current year, oil prices fell by about 10% against the slower-than-expected recovery of the Chinese economy after the lifting of quarantine restrictions. Other factors restraining the oil market upturn include the ongoing tightening of monetary policy by the Federal Reserve System and the continued high volume of Russian oil exports.
Oil prices are rising on Friday after declining the day before. Investors continue to gauge the economic outlook for the U.S. and China, Trading Economics noted.
The cost of July futures for Brent on London’s ICE Futures Exchange is $76.53 a barrel by 8:16 a.m. on Friday, up $0.67 (0.88%) from the previous session’s closing price. Those contracts fell $1.1 (1.4%) to $75.86 a barrel on Thursday.
The price of WTI futures for June oil grew by $0.56 (0.78%) up to $72.42 per barrel at electronic auctions of New York Mercantile Exchange (NYMEX) by that time. At the end of previous session the contracts value has fallen by $0.97 (1.3%) down to $71.86 per barrel.
It has become clear in recent months that trends in the oil market are driven more by concerns about demand than supply, Colin Cieszynski, chief market strategist at SIA Wealth Management, told MarketWatch.
“In recent days, concerns about banks have given way to concerns about the (U.S. – IF-U) government debt ceiling,” Cieszynski explained. – The approach (of the negotiating parties – IF-U) to reaching an agreement aimed at avoiding a default on U.S. debt has supported stock markets and appears to be providing some support for the oil market as well.”
U.S. President Joe Biden, speaking earlier at the White House, said he was confident that “we will have an agreement and the U.S. will not default.
Oil prices are falling on Thursday after a strong rise in the previous session.
The cost of July futures for Brent on London’s ICE Futures Exchange stood at $76.73 a barrel by 8:15 a.m. Thursday, down $0.23 (0.3%) from the close of the previous session. Those contracts rose $2.05 (2.7%) to $76.96 a barrel on Wednesday.
The price of WTI futures for June oil fell by $0.23 (0.32%) to $72.6 per barrel at electronic auctions of New York Mercantile Exchange (NYMEX) by that time. The contract value grew by $1.97 (2.8%) to $72.83 per barrel at the end of previous session.
Support to the market on Wednesday was given by the statements of U.S. President Joe Biden, who again expressed optimism about negotiations on the state debt ceiling issue, notes Market Watch.
“I am confident that we will have an agreement and the U.S. will not default,” Biden said while speaking at the White House.
“Investors’ hopes that the U.S. government debt limit problem will be resolved soon are increasing,” notes StoneX analyst Fawad Razakzada. – Biden’s statement led to an increase in appetite for risk in world markets, including oil”.
However, the market was constrained by the U.S. Department of Energy data which showed an increase in oil inventories in the country for the second week in a row.
Last week commercial inventories in the U.S. rose by 5.04 million barrels, a record high over the past 12 weeks. Analysts had expected a decline of 2 million barrels.
Gasoline inventories declined by 1.38 million barrels, while distillate stocks increased by 80,000 barrels. Experts forecasted reduction by 2 million barrels and 1.5 million barrels respectively.
Oil prices continue to decline Wednesday morning after ending the previous session in the negative.
The price of July futures for Brent on London’s ICE Futures Exchange stood at $74.88 a barrel by 8:08 a.m., down $0.03 (0.04%) from the close of the previous session. Those contracts fell $0.32 (0.4%) to $74.91 a barrel on Monday.
The price of WTI futures for June crude oil at NYMEX fell by $0.07, to $70.79 per barrel. The day before contract prices dropped $0.25 (0.4%) to $70.86 per barrel.
The market participants are waiting for data on fuel reserves in the USA for the week that ended on May 12. They forecast a decrease of oil reserves by 0.9-1.3 mln barrels. The Energy Department will publish the official statistics at 5:30 p.m. Wednesday. According to the American Petroleum Institute (API), reserves rose by about 3.7 million barrels.
Earlier, U.S. Energy Secretary Jennifer Granholm said the country intends to start adding to its Strategic Petroleum Reserve (SPR) next month. According to Price Futures Group analyst Phil Flynn, such a move would likely consolidate support for quotations at $70 a barrel, the target price for the US.
In addition, restocking the U.S. will try to “calm down” Saudi Arabia, which, apparently, was dissatisfied with the lack of buying activity from Washington at a time when “the massive outflow of funds from bank deposits gave it a chance,” quoted Flynn to MarketWatch.
Oil prices are rising on Tuesday morning after a rebound in the previous session, while before that quotations had been falling for three days in a row.
The price of July futures for Brent on London’s ICE Futures Exchange stood at $75.57 per barrel by 8:07 a.m., $0.34 (0.45%) above the close of the previous session. Those contracts rose $1.06 (1.4%) to $75.23 a barrel on Monday.
The price of WTI futures for June oil grew by $0.27 (0.38%) to $71.38 per barrel at electronic auctions of New York Mercantile Exchange (NYMEX) by that time. The day before the contracts value grew by $1.07 (1.5%) to $71.11 per barrel.
The strong macroeconomic data from China were a positive factor for the market, though it turned out to be worse than the market forecasts.
As it was reported, the industrial production in China in April increased by 5.6% compared to the same month last year after growth by 3.9% in March. Meanwhile, retail sales soared 18.4% last month after rising 10.6% a month earlier.
Analysts on average had forecast a 10.9% increase in industrial production and a 21% increase in retail sales, according to Trading Economics.
Also, the market is supported by hopes that the White House and Congress will be able to agree on raising the U.S. debt ceiling.
Negotiations on the debt ceiling between President Joe Biden and Republican House Speaker Kevin McCarthy are expected to resume on Tuesday.
Meanwhile, the U.S. Department of Energy announced plans to buy up to 3 million barrels of oil to replenish the strategic reserve. Last spring, Biden announced the sale of 180 million barrels from the reserve to combat fuel shortages in the market.
As of May 5, the volume of oil reserves in the strategic reserve was 362 million barrels, while the maximum possible level was 713 million barrels. The current figure is the lowest since the 1980s, writes MarketWatch.
Oil quotes are declining in the afternoon on Thursday. The market is assessing the monetary policy of the Bank of England, data on inflation and oil imports in China and waiting for the monthly OPEC report.
The price of July Brent futures on London’s ICE Futures Exchange stands at $76.25 a barrel by 2:25 p.m., down $0.16 (0.21%) from the previous session’s closing price.
The price of futures on WTI crude oil for June on electronic trade of the New York Mercantile Exchange (NYMEX) fell by that time by $0.19 (0.26%), to $72.37 per barrel.
The rate of consumer price growth in China slowed to a 0.1% annualized rate in April from 0.7% in March, data from the State Statistics Office showed. April inflation is the lowest since February 2021. Analysts on average had forecast it would weaken to 0.4%, Trading Economics noted.
In addition, China reduced oil imports in April by 16% year-on-year to 10.6 million barrels per day, adding to fears of a slowdown in its economy.
Traders may also react to the outcome of the Bank of England meeting, which raised the benchmark interest rate by 25 basis points to 4.5% per annum.
The oil market has shown itself to be a “lightning rod for volatility” of late, notes KCM Trade Senior Market Analyst Tim Waterer, whose words are quoted by MarketWatch. In his opinion, extreme price fluctuations cannot be ruled out in this regard, especially given the high sensitivity of oil prices to expectations for global economic growth.
