Oil Ekes Out Gain as US Lawmakers Address Tentative Debt Deal

(Bloomberg) -- Oil eked out a second session of gains as traders waited to see if US lawmakers would approve a tentative deal to avert a catastrophic default.

West Texas Intermediate futures edged above $73 a barrel after gaining 1.2% on Friday. President Joe Biden and House Speaker Kevin McCarthy voiced confidence that their agreement will pass Congress and be signed into law, avoiding a default that would threaten a financial collapse. Treasury Secretary Janet Yellen has said the debt limit must be extended by June 5 to avoid default, giving lawmakers until next week to act on the deal. Liquidity was thin in trading on Monday, with the US and UK observing national holidays.

The agreement “reduces the risk of a significant crash,” but “the outcome was pretty much priced in,” Bart Melek, global head of commodity strategy at TD Securities, said by phone. The agreement calls for reduced spending, making it “flat to modestly negative for demand.” 

Oil is about 9% lower this year as China’s lackluster economic recovery and the Federal Reserve’s aggressive monetary tightening weighed on the demand outlook. Russian supply has also been resilient, even after the nation said it would cut output, while domestic crude processing has dropped.

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