Investing.com — Oil prices edged lower Thursday, handing back some of the previous session’s large gains as concerns about U.S. economic growth prompted cautious trading.
By 09:05 ET (13:05 GMT), futures traded 0.8% lower at $72.23 a barrel, while the contract fell 0.8% to $76.33 a barrel.
Both benchmarks soared on Wednesday on optimism that President Joe Biden and top U.S. congressional Republican Kevin McCarthy can come to an agreement to raise the federal government’s $31.4 trillion debt ceiling and avoid a default that would have an economically catastrophic impact on the global economy.
Still, nothing has been signed and a deal has to be reached and passed by both chambers of Congress before the government runs out of money, which Treasury Secretary has said could be as soon as June 1.
“It was a risk-on move across markets yesterday with optimism growing that a deal will be made on the U.S. debt ceiling,” said analysts at ING, in a note. “The oil market continues to be driven by external developments, rather than fundamentals.”
Despite yesterday’s gains, the crude market is around 8% lower over the last month as monetary tightening in the U.S. and China’s lackluster economic growth weigh on the demand outlook.
Data released Thursday showed that the number of people filing in the U.S. fell more than expected last week, suggesting the labor market remains fairly strong despite the prolonged monetary tightening from the Federal Reserve.
This, coupled by hawkish comments from a number of Fed officials and still elevated prices, adds to concerns that the U.S. central bank could agree to another interest rate hike.
is “much too high” and not cooling fast enough yet to allow the Fed to pause its interest-rate hike campaign in June, according to Dallas Federal Reserve Bank President on Thursday.
Traders are pricing in around a 20% chance the will raise rates at its June meeting, whereas a month ago, traders were pricing in around a 20% chance of a cut.
This has helped the climb to a near a seven-week peak, which makes oil, which is denominated in dollars, more expensive for holders of other currencies.
Additionally, U.S. crude expanded by 5 million barrels last week, the biggest gain since mid-February, according to government data Wednesday.
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