May 29, 2023 (MLN): Oil prices rose on Monday after a tentative debt ceiling deal was finally reached between President Joe Biden and top congressional Republican Kevin McCarthy, possibly averting a default in the world's largest economy and oil consumer.
Brent crude is currently trading at $77.51 per barrel, up by 0.49% on the day.
While West Texas Intermediate crude (WTI) is standing at $73.27 per barrel, up by 0.58% on the day.
Joe Biden and McCarthy finally reached a tentative deal to suspend the federal government’s $31.4 trillion debt ceiling on Saturday evening, ending a months-long stalemate.
McCarthy tweeted on Saturday, “I just got off the phone with the president a bit ago. After he wasted time and refused to negotiate for months, we’ve come to an agreement in principle that is worthy of the American people.”
This deal sparked investors’ appetite for riskier assets such as commodities.
Tina Teng, a CMC market analyst stated that "The tentative debt deal offered a relief rally in risk assets, including crude oil," as reported by Reuters.
However, the latest U.S. inflation data came in higher than expected and market participants are now pricing in another interest rate hike.
This might cap gains for oil prices, as Tony Sycamore, IG's Sydney-based analyst also expressed this by saying "Higher U.S. rates are a headwind for crude oil demand."
Notably, both oil benchmarks marked a rise of 2.03% and 1.39% respectively in the prior week.
