Debt Ceiling Deal Boosts Oil Prices
The recent formalization of the US debt ceiling deal by Congress spurred a 2% increase in oil prices on Friday. This hike was bolstered by the unexpected rise in American employment numbers. Brent crude settled at an uptick of 2.4% at $76.13 per barrel, while West Texas Intermediate (WTI) experienced a 2.3% rise, reaching $71.74.
The bipartisan deal suspended the limit on the government’s $31.4 billion debt ceiling, preventing a potential default that could have thrown financial markets into turmoil.
Employment and Wage Analysis Create Speculations
The employment figures exceeded expectations in May. However, a moderation in wages led analysts to contemplate whether this would dissuade the Federal Reserve from implementing an interest rate hike in June. In the meantime, traders and analysts eagerly await the outcome of the upcoming Sunday meeting of the Organization of the Petroleum Exporting Countries (OPEC+).
Craig Erlam, Senior Market Analyst at Oanda, succinctly encompassed the analytical outlook by remarking that although it is widely believed that OPEC+ will not announce further cuts, similar thinking preceded the last meeting, which resulted in an additional reduction of about one million barrels. As a warning to short speculators, the Saudi Energy Minister urged caution, stating they should “watch out” for more “ouching.”
HSBC’s Predictions about OPEC’s Policy
HSBC, in a recent note, stated that it does not anticipate OPEC will amend its policy. However, the bank also noted that if the expected market deficit does not transpire in the second half of the year and prices remain under $80 per barrel, OPEC might consider reducing output later.
Despite the surge in crude prices on Friday, WTI is still on track for a weekly decline. The commodity has seen a more than 10% drop this year, partially attributed to the sustained exports from Russia in spite of the European Union’s sanctions.
Upcoming OPEC+ Meeting Impacts Market Expectations
Both the global oil market and traders will closely follow the results of the OPEC+ meeting on Sunday. Market expectations are fluctuating due to the unpredictability of OPEC+’s decisions, particularly in light of the last meeting’s outcome. This uncertainty, combined with the effects of the US debt ceiling deal and changes in American employment figures, keeps the oil market on edge as participants await further developments.
