Oil prices rose on Friday after dropping by more than 1% the previous day, as cautious investor optimism grew regarding the fading risks of the United States defaulting on its debts.
Brent crude futures rose by 1%, or 73 cents, to $76.59 per barrel ($75.45 at the time of writing), while US West Texas Intermediate crude increased by 0.9%, or 62 cents, to $72.48. ($72.85 at the time of writing)
Yi Yongrong, a market expert at IG, stated, “I think the markets are pricing out the risks of US default, which translates into increased investor appetite for risk.”
President Joe Biden and House Speaker Kevin McCarthy renewed their commitment this week to reach an agreement soon on raising the federal debt ceiling of $31.4 trillion and agreed to hold talks by Sunday.
Investor sentiment remains mixed, as they balance optimism about the US avoiding a debt default crisis with inflation figures that could suggest central banks around the world will raise interest rates.
Read more: Oil prices under pressure due to excess supply
It also appears that inflation in the United States is not decreasing quickly enough, according to two US policymakers, to allow the Federal Reserve to stop its moves to raise interest rates.
The US Treasury’s cash reserves, utilized for fulfilling its financial commitments, have made a comeback after plummeting to their lowest level in more than a month.
However, the possibility of funds depleting by the start of next month remains a concern if the debt ceiling is not raised or suspended before then.
On Wednesday, data revealed that the Treasury Department’s cash balance had climbed to $94.6 billion as of May 16.
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