Oil edges higher to head for modest gain as debt talks in focus

OIL edged higher to head for a modest weekly gain as investors tracked progress in talks to avoid a US default.

West Texas Intermediate traded above US$72 a barrel after slumping more than 3 per cent per cent on Thursday (May 25). Republican and White House negotiators were moving closer to an agreement to raise the debt limit, according to people familiar with the matter. Still, the details agreed to are tentative and a final accord is not yet in hand.

Supply dynamics remained in focus. Russia’s Deputy Prime Minister Alexander Novak said on Thursday that Opec+ wasn’t likely to take further measures at the gathering in Vienna in June, undercutting earlier remarks from Saudi Energy Minister Prince Abdulaziz bin Salman that speculators should “watch out.”

Crude has still sunk about 10 per cent this year as the lackluster economic recovery in top importer China and an aggressive monetary tightening campaign by the Federal Reserve pressured prices. More US rate rises may be in store, with traders pricing in another quarter-point increase within the next two meetings.

“Oil lost recent gains amid Opec’s reluctance to cut production further,” said James Whistler, managing director for brokerage Vanir Global Markets. “We see things softening a bit further from here as cautious sentiment permeates the markets.” BLOOMBERG