Oil prices edged higher on Thursday to recoup earlier losses, as a potential decision to skip a rate increase by the Federal Reserve and the passage of the US debt ceiling resulted in a better outlook for fuel demand in the world’s top oil consumer.
Brent crude futures gained 0.25% to $72.80 per barrel, while the US West Texas Intermediate (WTI) rose 0.22% to $68.24 per barrel.
The two benchmarks logged sharp losses in the previous sessions, with Brent falling 5.60% and WTI declining 6.30% as of Wednesday’s close from Friday.
Market analyst Tina Teng said cooler Chinese data and concerns over the debt ceiling may have oversold crude markets in the last two trading days.
Top oil importer China has provided slightly mixed signals about demand this week, with the official manufacturing purchasing manager’s index (PMI) contracting further to 48.8 in May, while activity in the service sector grew to its slowest in four months.
Still, concerns about Chinese industrial demand eased after the Caixin manufacturing PMI showed on Thursday to have expanded to 50.9 in the previous month from April’s reading of 49.5.
Crude Market Weighs Up Rate Hike Pause, Debt Ceiling Passing
Market sentiment improved on hopes of an interest rate hike skip and the US House of Representatives passing a debt ceiling deal, allowing crude prices to bounce back.
Fed officials signaled the possibility of a pause in interest rate hikes this month. Increasing interest rates in June could see a loss of momentum in the world’s largest economy and weaker oil demand.
Adding to the surge was the House’s passage of a bill that would suspend the government’s $31.4 trillion debt limit in a significant step to avoid a damaging default that is only days away.
US Treasury Secretary Janet Yellen has warned that the government will be unable to pay its bills starting June 5 if it fails to raise the debt ceiling. President Joe Biden commended the House’s decision and instructed the Senate to approve the deal immediately.
