Haunted By US Failure Predictions About Debt Ceiling, Oil Prices Sluggish

Crude oil price illustration (photo: Unsplash)

JAKARTA - crude oil prices fell at the close of trading Friday, May 19. This is because investors are worried that American politicians will fail to agree on a new debt ceiling and trigger a default that will harm the economy and reduce fuel demand following the pause in negotiating the matter.

Citing Antara, West Texas Intermediate (WTI) crude futures for June delivery fell 0.31 dollars, or 0.43 percent, to settle at 71.55 dollars a barrel on the New York Mercantile Exchange.

Brent crude futures for July delivery slipped 0.28 dollars, or 0.37 percent, to close at 75.58 dollars a barrel on the London ICE Futures Exchange.

However, crude prices Brent and WTI recorded their first weekly rise in a month, with both benchmark prices rising by about 2.0 percent.

It was reported that debt ceiling talks between the White House and members of the Republican legislature were suspended on Friday (19/5/2023), which reduced market sentiment.

The United States could fail to pay its debt obligations by June 1, according to US Treasury Secretary Janet Yellen.

"The price of crude oil is experiencing an extraordinary week as US economic prospects increase dramatically when lawmakers appear to be reaching an agreement on debt ceilings. Debt ceiling optimism quickly disappears on Friday (19/5/2023) and that makes oil prices drop sharply," said Edward Moya, senior market analyst at OANDA, a supplier of online multi-asset trading services.

Moya estimates that WTI's oil prices may be stuck in the range around a slightly higher level than 70 US dollars per barrel to "We see further evidence that debt deals will be reached and inflation is not heating up."

Pasar juga ketakutan oleh komentar Ketua Federal Reserve Jerome Powell bahwa inflasi " jauh di atas" target Fed, menambahkan belum ada keputusan yang dibuat mengenai tindakan suku bunga berikutnya.

It seems they won't be finalizing the debt deal today... the chances of a 25-base point increase (interest rate) in June meetings are increasing day by day. It seems that nothing can be done for the bullish," said Mizuho analyst Robert Yawger.

Providing some support for the market, US Treasury Secretary Janet Yellen reiterated the country's banking system's strength and health in a meeting with bank CEOs on Thursday (18/5/2023), the Treasury Department said in a statement.

The number of US active oil drilling rigs, future production indicators, fell 11 to 575 this week, the biggest weekly decline since September 2021, according to data released by oil service provider Baker Hughes on Friday (19/5/2023).