Oil prices surge amid potential interest rate pause, boosting market sentiment

June 01, 2023 (MLN): Oil prices rose on Thursday, amid an expected pause in U.S. interest rates and the passing of a crucial vote on the debt ceiling bill.

Brent crude is currently trading at $72.91 per barrel, up by 1.23% on the day.

While West Texas Intermediate crude (WTI) is standing at $68.39 per barrel, up by 1.15% on the day.

Market expectations were reversed when U.S. Federal Reserve officials pointed towards a skip in the potential rate hike.

Additionally, the U.S. House of Representative's passage of a bill suspending the U.S. government's $31.4 trillion debt ceiling improved the chances of averting a disastrous government default, as reported by Reuters.

Tina Teng, a markets analyst at CMC Markets in Auckland stated "Oil markets may have been oversold in the last two trading days due to the sluggish Chinese data and debt ceiling concerns. Sentiment rebounded amid the debt bill’s passage in the House, and (the) Fed’s rate hike pause signal also offered a rebounding opportunity,"

China the world's biggest oil importer, experienced a weaker than expected economic data, creating demand uncertainty.

Contraction in China’s manufacturing operations was faster than expected in May.

However, the Caixin/S&P Global China manufacturing purchasing managers' index (PMI) on Thursday showed a rise to 50.9 in May from 49.5 in April, tempering concerns about Chinese industrial demand.

API figures showed an increase in U.S. crude oil inventories rose by about 5.2 million barrels.

Gasoline inventories also posted a build of about 1.9 million barrels last week.

Traders are concerned regarding the upcoming meeting on June 4.

Notably, both benchmarks marked the seventh consecutive monthly decline, with Brent crude and WTI closed the month of May with a fall of 10.06% and 11.67% respectively.

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