Brent continues to gain on US debt talks, demand optimism
The front-month ICE Brent contract has climbed higher by $1.62/bbl on the day, to $76.51/bbl at 09.00 GMT.
PHOTO: The White House in Washington DC. Getty Images
Upward pressure:
The International Energy Agency (IEA) has raised its global oil demand forecast for 2023 and now expects demand to exceed supply by almost 2 million b/d this year. This could lead to supply tightening in the second half of the year.
US President Joe Biden has hinted that Congress is likely to raise the federal government's $31.4 trillion debt ceiling soon. “I’m confident that we’ll get the agreement on the budget, that America will not default,” Biden has said.
Positive commentary and optimism around both the US debt negotiations and a demand uptick have lifted Brent's spirits for now.
Downward pressure:
However, Biden has also clarified that ongoing "negotiation[s]" are "about the outlines of what the budget will look like, [but] not about whether or not we’re going to, in fact, pay our debts”.
It is likely that investors will become wary of the obscurity surrounding the US debt talks. In the long run, it is likely to limit crude's price gains and mount downward pressure on rates.
Commercial US crude inventories have seen a build of 5.04 million bbls in the week that ended on 12 May, according to official data by the Energy Information Administration (EIA). This is greater than the American Petroleum Institute (API) estimate of a build of 3.7 million bbls.
By Konica Bhatt
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