Oil rises on debt ceiling, demand optimism

US crude stockpiles rise 5m barells — EIA

By Reuters

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Published: Wed 17 May 2023, 11:18 PM

Oil prices rose $2 on Wednesday as optimism over oil demand and US debt ceiling negotiations outweighed supply concerns.

Brent crude futures rose $2.13, or 2.8 per cent , to $77.04 a barrel by 1:38 p.m. EDT (1838 GMT). West Texas Intermediate US crude was up $2.07 cents or 2.9 per cent to $72.03.


The International Energy Agency on Tuesday predicted demand would outpace supply by 2 million barrels per day (bpd) in the second half of the year, with China making up 60 per cent of oil demand growth in 2023.

“The IEA’s assessment has added optimism to the market this morning,” said Bob Yawger, director of energy futures at Mizuho. He added that crude prices were also bolstered by optimism over debt ceiling talks.


Debt ceiling negotiations have preoccupied market participants, who took heart from Republican House of Representatives Speaker Kevin McCarthy’s Wednesday vow to avoid what would be a catastrophic default.

The optimism outweighed a crude inventory increase of 5 million barrels in the week ended May 12 reported by the Energy Information Administration. Analysts polled by Reuters had expected a 900,000 barrel drop.

The crude inventory build added to concerns about US growth after data showed retail sales rose 0.4 per cent in April, short of estimates for an increase of 0.8 per cent .

However, gasoline stocks drew down by 1.4 million barrels as the four-week gasoline product supplied - a proxy for demand - rose to its highest level since December 2021.

In China, April industrial output and retail sales growth undershot forecasts, suggesting the economy lost momentum at the beginning of the second quarter.

Markets are in a “wait-and-watch mode” over the outcome of the debt ceiling negotiations, said Vandana Hari, founder of oil market analysis provider Vanda Insights.

“A bunch of Chinese macro-economic data for April released on Tuesday confirmed the narrative of a patchy and slow recovery in the country and continue to weigh on oil market sentiment.”


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