(Reuters) – Oil prices stabilized on Monday after U.S. leaders reached a tentative agreement on a debt ceiling, perhaps to avert a default in the world’s largest economy and oil consumer, but gains were limited by concerns about raising interest rates.
Brent crude futures fell 20 cents, or 0.2%, to $76.75 a barrel by 1055 GMT, while US West Texas Intermediate crude was $72.58 a barrel, down 9 cents, or 0.1%.
Trade is expected to cool down on Monday due to holidays in the United Kingdom and the United States.
Over the weekend, US President Joe Biden and House Speaker Kevin McCarthy drafted an agreement to suspend the $31.4 trillion debt ceiling and limit government spending for the next two years. The two leaders expressed confidence that members of the Democratic and Republican parties would vote in support of the agreement.
Reaching the agreement and being close to avoiding a US debt default has renewed investor appetite for riskier assets such as commodities.
Analysts said the temporary deal eased pressure on the markets, providing a rally in risky assets, including crude oil.
“We could see further gains as a recovery begins in the broader financial markets when the US returns from the Memorial Day long weekend,” said Vandana Hari, founder of oil market analysis Vanda Insights.
However, analysts see any increase in oil prices from the debt deal as short-term.
IG analyst Tony Sycamore said:
Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known as OPEC+, are scheduled to meet on June 4.
Saudi Energy Minister Abdulaziz bin Salman warned short sellers who bet that oil prices will fall to “be careful,” in a possible sign that OPEC+ may cut production further.
However, statements by Russian oil officials and sources, including Deputy Prime Minister Alexander Novak, indicate that the world’s third largest oil producer is leaning towards leaving production unchanged.
Additional reporting by Florence Tan in Singapore and Mohi Narayan in New Delhi; Editing by Ed Osmond, Kirsten Donovan
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