Oil prices fell on Thursday as traders warily watched for signs of progress on talks to raise the U.S. debt ceiling, after surging nearly 3% in the previous session on optimism over U.S. fuel demand.
Brent crude futures dipped 29 cents, 0.4%, to $76.67 a barrel as of 0705 GMT. U.S. West Texas Intermediate crude dropped 32 cents to $72.51 a barrel.
A sharp plunge in U.S. gasoline inventories due to demand surging to the highest levels since 2021, and optimism surrounding negotiations over the U.S. debt ceiling, helped the main crude benchmarks settle more than $2 higher on Wednesday.
President Joe Biden and top U.S. congressional Republican Kevin McCarthy on Wednesday underscored their determination to reach a deal soon to raise the federal government’s $31.4 trillion debt ceiling and avoid an economically catastrophic default.
Also weighing on prices was the increased probability of an interest rate hike by the U.S. Federal Reserve.
The strength of April U.S. economic data, in addition to improving optimism about the debt ceiling negotiations and the health of regional banking stocks overnight have strengthened market expectations of a further hike, ANZ Research said in a note on Thursday.
After a months-long standoff, Biden and McCarthy on Tuesday agreed to negotiate directly. A debt agreement needs to be reached and passed by both chambers of Congress before the government runs out of money to pay its bills, which could be as soon as June 1.