Brent gains on US debt ceiling deal and potential interest rate freeze

The front-month ICE Brent contract has gained by $2.69/bbl on the day, to $75.51/bbl at 09.00 GMT.

PHOTO: Oil barrels and a pump jack placed on US dollar bills. Getty Images

Upward pressure:

Brent futures gained to reverse earlier losses after US Federal Reserve governor Philip Jefferson said the central bank is considering keeping its key interest rate steady at its upcoming meeting. Indications of an interest rate freeze have boosted optimism in the crude oil market and other commodity futures that rely on consumer demand.

Brent was further supported after the $31.4 trillion US debt ceiling bill was passed in Washington with majority support from both Democrats and Republicans to avoid an unprecedented default.

Crude oil investors are now focused on the outcome of the OPEC+ meeting on 4 June as speculations about another round of output cuts continue.

Downward pressure:

Commercial US crude inventories gained by 4.49 million bbls on the week, the EIA’s latest figures showed yesterday. The EIA crude stock build fell short of the 5.2 million-bbl build estimated for the week ending 26 May by the API. And both builds ran counter to market analyst projections of a 1.2 million-bbl draw, according to Trading Economics.

China released weaker-than-expected manufacturing and services data for May on Wednesday, provoking the market to worry about a lag in oil demand.

Chinese economic rebound has stalled, and global manufacturing activity is struggling, said OANDA’s market analyst Craig Erlam. “Germany is in recession and the US may be headed for one. The questions now are will OPEC+ see it that way and could Russia be convinced to cut again? If not, Brent crude may well test those recent lows more forcefully,” he added.

By Aparupa Mazumder 

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