© Reuters. FILE PHOTO: The sun sets behind a crude oil pump jack on a drill pad in the Permian Basin in Loving County, Texas, U.S. November 24, 2019. REUTERS/Angus Mordant
By Laura Sanicola
(Reuters) -Oil prices settled up about $2 on Wednesday as optimism over oil demand and U.S. debt ceiling negotiations outweighed worries about abundant supply.
futures settled up $2.05, or 2.7%, to $76.96 a barrel. West Texas Intermediate settled up $1.97 or 2.8% to $72.83.
“Today’s strong oil trade was all about the expectation of a debt ceiling agreement, likely by the end of this week, that appeared to lift a negative burden across most asset classes, including oil,” said Jim Ritterbusch, president of Ritterbusch and Asssociates in Galena, Illinois.
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.
After a months-long standoff, the Democratic president and speaker of the House of Representatives on Tuesday agreed to negotiate directly. An agreement needs to be reached and passed by both chambers of Congress before the federal government runs out of money to pay its bills, as soon as June 1.
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 U.S. growth after data showed retail sales rose 0.4% in April, short of estimates for an increase of 0.8%.
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.
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% of oil demand growth in 2023.
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 (NASDAQ:) 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.”
This story originally appeared on Investing