Oil rises in early trade after steep losses ahead of US debt ceiling vote

31 May 2023 , 10:19 AM

After suffering significant losses in the previous session, oil prices gradually increased on Wednesday as market players anticipated a vote on a bipartisan agreement to raise the $31.4 trillion U.S. debt ceiling.

August delivery Brent oil futures were up 11 cents to $73.82 a barrel, while August delivery WTI was up 8 cents to $69.54 a barrel in the United States. Both decreased by almost 4% on Tuesday.

On track for monthly drops of more than 7% and 9%, respectively, were the July contract for Brent, which expires on Wednesday, and the U.S. benchmark.

Despite being directly challenged by some, top House Republican Kevin McCarthy on Tuesday urged members of his party to approve the agreement, which dragged on oil prices during the previous session.

Nevertheless, a crucial party hardliner declared he would probably vote in favour of the proposal in a crucial procedural vote, enabling it to pass the crucial House of Representatives Rules Committee with a Republican majority. The 99-page bill was to be put to a vote in the committee later.

The OPEC+ meeting, which takes place on June 4 and is attended by allies including Russia, and the debt deadline are almost simultaneous. Traders were unsure of whether the organization will increase output cuts as the market is being affected by a drop in pricing.

Last week, Abdulaziz bin Salman, the energy minister for Saudi Arabia, advised short-sellers who were wagering that oil prices would decline to ‘watch out’ as a possible indication that OPEC+ would reduce output.

Thoughts from Russian oil officials such as Deputy Prime Minister Alexander Novak, suggest the third-largest oil producer in the world is inclined to maintain output.

OPEC+ reduced its oil production by an additional 1.2 million barrels per day (bpd) in April, according to calculations by Reuters, bringing the total amount of cutbacks to 3.66 million bpd.

Participants in the market also anticipated later on Wednesday expected industry data on U.S. crude stockpiles. Due to a U.S. holiday earlier this week, the data was delayed by one day.

According to seven analysts surveyed by Reuters, oil inventories decreased by around 1.2 million barrels in the week ending May 26.

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