Brent buoyed by tentative US debt ceiling deal

The front-month ICE Brent contract has increased by $0.8/bbl on the day from Friday, to $77.2/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent futures gained after US President Joe Biden and House Speaker Kevin McCarthy reached a tentative agreement on Saturday to halt the $31.4 trillion debt ceiling for the next two years. The tentative deal is expected to avert a US debt default and could be put to a vote later this week.

“The tentative debt deal offered a relief rally in risk assets, including crude oil,” CMC market analyst Tina Teng told Reuters.

The US oil and gas rig count has gone down by 44 in May, the biggest drop since 2020, after energy firms in the US cut rigs for a fourth consecutive week, according to energy firm Baker Hughes.

“Things are tighter than they ever have been. Upside price risks abound as inventories are below average and demand continues to defy the skeptics,” said Phil Flynn, senior account executive of The Price Futures Group.

Downward pressure:

Meanwhile, investors will wait for the final outcome of a vote on the proposed US debt ceiling deal. The US Treasury had warned that the country would run out of cash without a debt deal by 5 June.

Market participants will also wait for fresh cues from China's manufacturing and services data due for release this week. Brent investors have been betting on a robust economic rebound in China to fuel oil demand, but Chinese data has so far only signalled a mild economic recovery.

By Aparupa Mazumder

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