Oil prices experienced an increase following a resolution of the U.S. debt ceiling issue, preventing a default in the largest oil-consuming nation. Simultaneously, focus shifted towards a forthcoming meeting of OPEC ministers and their allies over the weekend. By 1134 GMT, Brent crude futures rose by $1.21 or 1.6%, reaching $75.49 per barrel, while U.S. West Texas Intermediate crude (WTI) saw an increase of $1.19 or 1.7%, reaching $71.29. These contracts were on track for their first weekly decline in three weeks. The bipartisan agreement to suspend the limit on the U.S. government's $31.4 billion debt ceiling brought assurance to the markets, preventing a sovereign default that could have caused significant disruption in global financial markets.
Moreover, the potential indication of a pause in interest rate hikes by the Federal Reserve further supported oil prices, as it influenced the depreciation of the U.S. dollar, making oil more affordable for holders of other currencies. The release of U.S. employment data at 1230 GMT is eagerly awaited as it may provide insights into future decisions by the Federal Reserve. Investors are also focused on the meeting scheduled for June 4, which involves the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, collectively known as OPEC+.
In April, OPEC+ unexpectedly reduced daily production by 1.16 million barrels, but the gains from that decision have since been reversed, and prices are currently below the pre-cut levels. Reuters sources have indicated that there is unlikely to be any further cuts to output. On the demand side, the U.S. Institute for Supply Management (ISM) reported that its manufacturing Purchasing Managers' Index (PMI) dropped to 46.9 last month, marking the seventh consecutive month in which the PMI remained below 50, indicating a contraction in activity. Meanwhile, manufacturing data from China, the second largest oil consumer globally, presented a mixed outlook.
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