Oil prices jump 2% after U.S. debt deal and jobs data as focus turns to OPEC
Oil prices rose more than 2% on Friday after the U.S. Congress passed a debt ceiling deal that averted a government default in the world’s biggest oil consumer and jobs data fed hopes for a possible pause in interest rate hikes ahead of a meeting of OPEC and its allies this weekend.
Brent futures settled up 2.49% to $76.13 a barrel. U.S. West Texas Intermediate (WTI) crude rose 2.34% to $71.74.
For the week, both contracts fell more than 1% for their first weekly losses in three weeks.
The U.S. Senate approved a bipartisan deal to suspend the limit on the U.S. government’s $31.4 billion debt ceiling, staving off a sovereign default that would have rocked financial markets.
U.S. employment increased more than expected in May, but a moderation in wages could allow the U.S. Federal Reserve to skip an interest rate hike this month for the first time in more than a year. Higher interest rates can slow the economy and reduce oil demand.
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Oil traders have turned their attention to the June 4 meeting of OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia. The group in April announced a surprise cut of 1.16 million barrels per day, but price gains from that move have been erased with crude trading below pre-cut levels.
“While there seems to be a widely held view that (OPEC+) won’t announce any further cuts, it’s worth noting that the same was true at the last meeting and then the group announced cuts of roughly another million barrels,” said Craig Erlam, senior market analyst at OANDA.
“It’s hard to ignore the warnings from the Saudi energy minister to ‘watch out’, threatening more “ouching” for short speculators,” Erlam noted. “This may be playing into the mind of traders fearing another surge on the open next week.”
Saudi Arabia is the biggest producer in OPEC.
On the demand side, manufacturing data out of China, the world’s second biggest oil consumer, painted a mixed picture.
China is suffering from early heatwaves, expected to persist through June, putting power grids under strain as consumers in mega-cities like Shanghai and Shenzhen crank up air conditioners.
