Oil rises after reaching an initial agreement on the US debt ceiling

Oil prices rose in early Asian trade on Monday after US leaders reached a tentative agreement on the government’s debt ceiling, which could prevent a catastrophic default in the world’s largest economy and oil consumer.

And by 2317 GMT, Brent crude futures rose 39 cents, or 0.5 percent, to $ 77.34 a barrel, and West Texas Intermediate crude futures rose 45 cents, or 0.6 percent, to $ 73.12 a barrel.

On Saturday, US President Joe Biden and House Speaker Kevin McCarthy reached an agreement in principle to suspend the government’s debt ceiling of $31.4 trillion. Both expressed confidence on Sunday that both House and Senate Democrats and Republicans would support the agreement.

But the markets may only breathe a sigh of relief for a while because once the deal is approved, the US Treasury is expected to issue bonds that further tighten liquidity and increase the cost of funding for companies already struggling due to higher interest rates.

Some investors remain cautious in light of signs that the OPEC + group, which includes the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, may consider additional production cuts at its June 4 meeting.

Investors are also looking forward to data on the manufacturing and services sectors in China this week, as well as data on non-farm payrolls in the United States on Friday, in search of indications of economic growth and demand for oil.