© Reuters. FILE PHOTO: An aerial view shows oil tanks belonging to Transneft Oil Pipeline Company at the Kozmino crude oil terminal on the shore of Nakhodka Bay near the port city of Nakhodka in Russia on June 13, 2022. The photo was taken by drone. Photograph: Tatiana Mill/Reuters
Written by Jessalyn Leire
SINGAPORE (Reuters) – Oil prices rebounded on Friday from losses of more than 1% a day earlier as investors turned to cautious optimism about fading risks of a US debt default.
Brent crude futures rose 59 cents, or 0.8 percent, to $76.45 a barrel by 0420 GMT, while US West Texas Intermediate crude rose 48 cents, or 0.7 percent, to $72.34.
“I think the markets have been identifying the risk of a US debt default, which translates into a riskier environment, some lower buying from previous oversold conditions,” said Yeap Jun Rong, market strategist at IG.
Earlier this week, US President Joe Biden and House Speaker Kevin McCarthy reiterated their goal of reaching a deal to raise the $31.4 trillion federal debt ceiling, and agreed to speak as soon as Sunday.
“Once we get past the US debt ceiling issue, fundamentals may ultimately be more important to determine if any upward move can be sustained,” Yip said.
Sentiment remains mixed as investors reconcile optimism about avoiding a US debt default with inflation data that may herald an interest rate hike from global central banks.
US inflation does not appear to be declining fast enough to allow the Federal Reserve to halt its campaign to raise interest rates, according to two federal policymakers.
Analysts from National Australia Bank (OTC:) said the prospect of additional rate hikes adds to concerns about weak demand in the US.
However, analysts said there is an upside to pricing as they expect Chinese demand to continue to improve throughout 2023, which should offset a slowdown in OECD demand.
Data earlier this week showed that the productivity of Chinese oil refineries in April rose 18.9% from a year earlier to the second highest level on record.
Chinese refineries have maintained high operating rates to meet recovering domestic fuel demand and build inventories ahead of the summer travel season.