Oil futures: Crude off lows ahead of key US debt ceiling vote

31 May 2023

Quantum Commodity Intelligence – Crude oil futures Wednesday were in retreat again, but prices rebounded from lows after Speaker of the House Kevin McCarthy confidently predicted the debt ceiling bill will become law.

Aug23 ICE Brent futures were trading at $72.65/b (1900 GMT), compared to a low of $71.50 and Tuesday's settle of $73.71/b, while Jul23 expired at $72.66/b.

At the same time, Jul23 NYMEX WTI was trading $68.14/b, versus Tuesday's close of $69.46/b, with oil prices now back at levels seen at the start of May.

The compromise deal to raise the debt ceiling passed its first test Tuesday evening in the House Rules Committee, while focus now turns to whether the deal will get the necessary votes to pass into law.

A floor vote on the Fiscal Responsibility Act is set for around 2030 Eastern Time Wednesday, according to a tentative House voting schedule.

House Republican leaders have signalled confidence in gathering up enough votes to pass the bill and avoid triggering a debt crisis, but several high-profile party voices have spoken out against spending levels.


Oil prices also wobbled after a government report showed manufacturing in China continues to contract, sparking renewed concerns over the nation's uneven economic recovery.

Data from China's statistics bureau revealed the official manufacturing purchasing managers' index (PMI) dropped for a second month to 48.8 in May, the lowest level since December last year. The non-manufacturing PMI, which is a measure of business sentiment in the services and construction sectors, fell to 54.5 in May from 56.4 in April.

This week's price slump has now wiped out early-month gains and comes ahead of the first OPEC+ ministerial meeting of 2023 on 4 June.

This could trigger further output reductions, but compliance will be high on the list of talking points, with data showing Russia failing to implement 500,000 bpd of cuts announced earlier this year fully.

Analysts said any signs of discord within OPEC+ would likely dampen prices further, but for now, a complete breakdown such as that in 2020 is seen as unlikely.

In March 2020, OPEC+ failed to agree on cutting supplies in the face of the Covid-19 pandemic, as Russia and Saudi opened the taps and triggered a massive price drop.