Oil futures: Crude slumps as debt ceiling talks 'paused'
Quantum Commodity Intelligence – Crude oil futures went into a sharp downturn during late-afternoon trading hours Friday, falling $2/b from the day's high as doubts surfaced over the US reaching a speedy agreement on raising the debt ceiling.
Jul23 ICE Brent futures were trading at $75.72/b (1930 GMT), compared to the day's high of $77.70 and Thursday's settle of $75.86/b. Prices were, however, on course for a small weekly, having closed last Friday at $74.17/b.
At the same time, Jul23 NYMEX WTI was trading $71.79/b, versus Thursday's close of $71.94/b, while Jun23 was trading at $71.65/b heading into expiry.
Prices went into a tailspin after Republican Rep. Garret Graves told reporters as he was exiting a Capitol meeting on the debt ceiling that negotiations are on "pause".
He added talks with the White House are "not productive" and the administration has been putting forth "unreasonable" requests, which raised the prospect of a catastrophic default for traders.
House Speaker Kevin McCarthy had told reporters Thursday he is optimistic that congressional negotiators could reach a deal to raise or suspend the debt ceiling in time to hold the first vote on it next week.
Markets are expected to remain jittery until a debt-ceiling deal is done, while China's below-expectations economic performance is also casting a shadow.
"On the macro level, Oil markets are now torn between robust economic data from the US, soft data, and deflationary impulses from China," said Stephen Innes, managing partner SPI Asset Management.
Physical
The more sluggish performance in physical markets was highlighted this week after QatarEnergy awarded its monthly Al Shaheen tender for July loading at the lowest premiums since the early part of 2021.
The state-owned firm was heard to have sold five cargoes of the medium sour grade at premiums averaging around +$1/b versus the underlying Dubai swap, compared to more than +$2/b for June cargoes.
Physical markets in Europe were also under pressure, with the benchmark Forties grades trading at flat versus the underlying Brent swap on Thursday.
Looking ahead, the OPEC meeting in early June could trigger further output cuts as ministers gather in Vienna, although there is no overall consensus for now.
Traders will also be keeping a watch on the G7 meeting in Japan, which starts Friday, where world leaders are expected to discuss further sanctions against Russia.
