Oil Prices Rise to $77, Traders Anticipate Agreement on U.S. Debt

Oil prices rose on Friday in international markets to $77, driven by estimates that the White House and Congress will reach an agreement to raise the U.S. debt ceiling and eliminate the threat of payment issues.

In the London market, the price of a barrel around noon was $1.15 higher than yesterday’s closing, amounting to $77.01.

In the U.S. market, a barrel for July delivery traded at a price $1.16 higher, at $73.10. In less active contracts for June delivery, which will expire on Monday, it rose by $1.09 to $72.95.

Markets are closely monitoring the negotiations between U.S. President Joe Biden and House Speaker, Republican Kevin McCarthy, regarding raising the federal debt ceiling, which currently stands at $31.4 trillion.

If the ceiling is not raised, the government may be unable to service its financial obligations as early as June 1, warned Treasury Secretary Janet Yellen.

Earlier in the week, Biden and McCarthy reiterated their goal of reaching an agreement.

– “I think the markets have priced out the risk of U.S. debt repayment issues, which has translated into an increased risk appetite and buying in the London market, given the lower prices after a recent wave of overselling,” said Yeap Jun Rong from IG.

Prices are also supported by expectations that demand in China will increase by the end of the year, which should offset the slowdown in OECD member countries.

In April, processing in Chinese refineries rose by 18.9 percent compared to the same month last year, according to data released earlier this week, to ‘cover’ the recovered demand and build inventories ahead of the summer travel season.

However, data on inflation has cast a shadow over the market’s good mood, which could prompt central banks in several countries to continue raising interest rates.

Thus, two officials from the U.S. central bank stated that inflation, judging by the data, is not cooling fast enough to pause the interest rate hike cycle.

The possibility of further interest rate increases in the U.S. fuels fears of weaker demand, explain analysts from the National Australia Bank.

The Organization of the Petroleum Exporting Countries (OPEC) announced today that on Thursday, the price of a barrel of its members’ oil basket rose by $1.46 to $76.06.