Oil set for second weekly gain amid US debt ceiling talks and Opec+ uncertainty

Gas is flared at an oil complex in the northern Iraqi province of Kirkuk. AFP

Oil prices steadied on Friday after falling by more than 3 per cent the previous day, with futures on track to post a second weekly gain as investors keenly monitor the US debt ceiling talks and the next moves from Opec+.

Brent, the benchmark for two thirds of the world’s oil, was trading 0.13 per cent higher at $76.36 a barrel at 10.52am UAE time. West Texas Intermediate, the benchmark for US crude, was up 0.29 per cent at $72.04 a barrel.

You are reading: Oil set for second weekly gain amid US debt ceiling talks and Opec+ uncertainty

On Thursday, Brent settled 2.68 per cent lower at $76.26 while WTI was down 3.38 per cent at $71.83 a barrel.

The US is days away from a potential debt default, which would wreak havoc on consumers and the American economy, as well as send shock waves across the entire global financial system.

US President Joe Biden’s administration and Republicans are still tussling over raising the federal $31.4 trillion debt ceiling, with each side describing another’s proposals as too extreme.

House Speaker Kevin McCarthy on Thursday said “we do not have an agreement yet” ahead of a holiday weekend before the debt default deadline on June 1.

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“We knew this would not be easy,” Mr McCarthy told reporters. “It’s hard but we’re working. And we’re going to continue to work until we get this done.”

Futures were down earlier on a strong dollar and as Russia said it expected no further supply cuts.

“Crude prices are weakening as king dollar returns and after Russia slashes any Saudi hope of delivering another production cut at the June 4th meeting,” said Edward Moya, a senior market analyst at Oanda.

Russian Deputy Prime Minister Alexander Novak said he expected no new steps from the Opec+ group of 23 oil-producing countries at its meeting next week, Reuters reported on Thursday, citing his interview with Russian daily Izvestia.

“I don’t think that there will be any new steps because just a month ago certain decisions were made regarding the voluntary reduction of oil production by some countries due to the fact that we saw the slow pace of global economic recovery,” Mr Novak was quoted as saying.

This came after Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman told oil market short sellers to “watch out” earlier this week, which was seen by some traders as a signal for further output reductions.

On April 2, some Opec+ members – Saudi Arabia, the UAE, Iraq, Kuwait, Oman and Algeria – announced voluntary production cuts of 1.16 million barrels per day.

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Brent has lost more than 11 per cent of its value this year amid demand concerns.

“Markets remain on edge, with no debt ceiling deal yet forthcoming. But still the dollar managed to gain against peers,” said Edward Bell, senior director of market economics at Emirates NBD.

The US Dollar Index – a measure of the value of the greenback against a weighted basket of major currencies – has gained about 1 per cent over the past week.

A stronger dollar makes oil more expensive for holders of other currencies, hurting demand.

Crude demand is expected to rise in the second half of 2023, driven by higher consumption in Asia.

Last week, the International Energy Agency raised its 2023 global oil demand estimates and said the current pessimism in the market was in “stark contrast” to the agency’s expectations of a tighter market in the second half of the year.

The agency now expects global crude demand to rise by 2.2 million bpd in 2023, an increase of 200,000 bpd from its April forecast.

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