Oil Prices Slide as Debt Ceiling Talks Pause, Raising Concerns of Possible Default

Oil prices reversed course to trade lower on Friday after reports that the debt ceiling talks between the White House and House Republicans have been paused, worrying markets of a possible default that could cut demand.

Brent futures fell 9 cents, or 0.1%, to $75.77 a barrel by 11:55 a.m. ET (3:55 GMT), while West Texas Intermediate U.S. crude for July expiry eased 22 cents, or 0.3%, to $71.74.

The less active U.S. crude contract for May, which is due to expire on Monday, eased 20 cents, or 0.3%, to $71.77.

Markets were also spooked by Federal Reserve Chair Jerome Powell’s comments that inflation was ”far above” the Fed’s objective.

“It doesn’t look they are going to get the debt deal done today… there’s not a lot for the bulls to hang their hats on,” said Mizuho analyst Robert Yawger.

Earlier this week, U.S. President Joe Biden and Speaker of the House of Representatives Kevin McCarthy reiterated their aim to strike a deal to raise the $31.4 trillion federal debt ceiling, agreeing to talk as soon as Sunday.

Providing some support for the markets, U.S. Treasury Secretary Janet Yellen reaffirmed the strength and soundness of the country’s banking system in a meeting with bank CEOs on Thursday, the Treasury Department said in a statement.

The potential for additional rate hikes increases concerns about demand weakness in the United States, said analysts from National Australia Bank.

The analysts said, however, prices could rise as they expect China’s demand to continue increasing throughout 2023, which should offset the slowdown in OECD demand.

China’s oil refinery throughput in April rose 18.9% from a year earlier to the second-highest level on record, data showed earlier this week.

Chinese refiners maintained high runs to meet recovering domestic fuel demand and build stockpiles ahead of the summer travel season.

(This story has not been edited by News18 staff and is published from a syndicated news agency feed – Reuters)