TOKYO: Oil prices rose on Tuesday as the expectations that the debt ceiling deal in the United States, the globe’s most significant oil user, will spur more demand, but fears of further interest rate rise and that OPEC+ will leave output quotas unchanged capped gains.
According to Reuters, Brent crude futures climbed 35 cents, or 0.5 per cent, to 77.42 dollars a barrel by 0145 GMT after gaining 12 cents on Monday.
United States West Texas Intermediate (WTI) crude rose 53 cents to 73.20 dollars a barrel, up 0.7 per cent from Friday’s close. There was no settlement on Monday because of a United States public holiday.
While the debt ceiling deal has spurred buying in riskier assets such as commodities, primary oil producers will meet on June 4, and it is unclear whether they might raise their output cuts amid an overall price slump since the middle of April. Expectations are for United States interest rates to increase further, potentially crimping economic growth and, therefore, oil demand.
Toshitaka Tazawa, an analyst at Fujitomi Securities Co, said, “Investors have shifted their attention to the outcome of the OPEC+ meeting this weekend as there’ve been mixed messages from main oil producers.”
He said, “A United States debt ceiling deal boosted risk appetite, but investors are reluctant to step up buying amid worries over inflation and potential further rises of interest rates.”
Over the weekend, United States President Joe Biden and House of Representatives Speaker Kevin McCarthy forged the agreement to suspend the 31.4 trillion dollars debt ceiling and cap government spending for the next two years.
Both leaders expressed confidence that Democratic and Republican lawmakers would support the deal. The United States House Rules Committee said it would meet on Tuesday afternoon to discuss the debt ceiling bill, which needs to pass a divided Congress before June 5.
Investors are closely watching whether the Organization of the Petroleum Exporting Countries (OPEC) and its partners, including Russia, known as OPEC+, would change their output quotas.
Saudi Energy Minister Abdulaziz bin Salman the previous week warned short-sellers betting that oil prices would fall to “watch out” in the possible signal that OPEC+ may further cut output.
