Oil Prices Rise Supported by Optimism over US Debt Ceiling Talks

NEW YORK - Crude futures prices firmed around two US dollars in late trading Wednesday (Thursday morning of Western Indonesian Time or WIB), as optimism about talks on the government's debt limit in the United States and oil demand outweighed concerns about ample supply.

West Texas Intermediate (WTI) crude futures for June delivery lifted $1.97, or 2.78 percent, to settle at 72.83 dollars a barrel on the New York Mercantile Exchange.

Brent crude futures for delivery in July added 2.05 dollars, or 2.74 percent, to close at 76.96 dollars a barrel on London's ICE Futures Exchange.

"Today's strong oil trade is all about expectations of a debt ceiling agreement, likely by the end of the week, which appears to be lifting the negative weight across most asset classes, including oil," said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois, Thursday, May 18.

US leaders expressed optimism at the ongoing talks on the US debt ceiling after the second meeting between US President Joe Biden and congressional leaders on Tuesday, May 16.

Biden said he had productive meetings with Congressional leaders.

"I'm confident we will get approval on the budget, that America will not default," he said.

US House of Representatives Speaker Kevin McCarthy also expressed optimism that the United States would not default on its debt obligations.

Oil jumped on optimism over the debt ceiling while the decline in domestic oil production in the previous week provided additional support for oil prices, according to Vladimir Zernov, analyst with market information supplier FX Empire.

US daily crude production fell to 12.2 million barrels in the week ended May 12 from 12.3 million barrels in the previous week, according to oil inventory data released by the US Energy Information Administration (EIA) on Wednesday (17/5/2023).

However, US commercial crude oil inventories increased by 5 million barrels last week, contrasting market expectations for week-on-week declines.