The suspension of negotiations to raise the US debt ceiling puts pressure on the markets
Dubai – Al Arabiya.net
Published in: May 20, 2023: 11:25 a.m. GST
Last updated: May 20, 2023: 11:54 AM GST
Oil changed its direction to decline at the end of Friday’s trading session, after negotiations to raise the public debt ceiling between Republican members of the US House of Representatives and the administration of President Joe Biden temporarily stopped, which threatens the government’s failure to pay its obligations, which will reduce energy demand.
Brent crude futures fell 28 cents, or 0.8%, to $75.58 a barrel at settlement, and US West Texas Intermediate crude fell 25 cents, or 0.3%, to $71.69.
The US crude contract for May delivery, which is scheduled to end on Monday, closed down 31 cents, or 0.4%, at $71.55 a barrel.-
Despite this, both benchmarks posted their first weekly gains in a month, as both benchmarks gained about 2%.-
Time is limited for Biden and House Speaker Kevin McCarthy to reach an agreement to raise the $31.4 trillion federal borrowing cap, or the government will face a catastrophic default. The Treasury warned that the government may not be able to pay its obligations by June 1.
A White House official said that an agreement is still possible, while there is also concern in the markets due to the statements of Jerome Powell, Chairman of the Federal Reserve (US Central Bank), in which he said that inflation is still “much higher” than the level targeted by the bank.
He added that no decision had been taken yet on the next step regarding interest rates.
“It doesn’t look like they will reach an agreement on the debt ceiling,” said Mizuho analyst Robert Yawger. “The possibility of a 25 basis point rate hike at the June meeting is growing every day.”
US stocks, Treasury yields and the dollar fell after news spread of the suspension of talks to raise the debt ceiling and Powell’s remarks.