NEW YORK: Oil prices slid about 1% on Thursday as a political standoff over the US debt ceiling stoked recession jitters in the world’s biggest oil consumer, while rising US jobless claims weighed on sentiment and a stronger dollar pressured oil too.
Brent futures fell 73 cents, or 1.0%, to $75.68 a barrel by 11:19 a.m. EDT (1519 GMT). US West Texas Intermediate (WTI) crude fell 92 cents, or 1.3%, to $71.64.
The dollar rose to its highest in a week against a basket of major currencies, after recent jobless claims data strengthened the case for the Federal Reserve to halt interest rate hikes but did not prompt expectations of year-end rate cuts.
Oil falls 2pc on surprise jump in US crude inventories
A stronger US dollar makes oil more expensive in other countries. Higher interest rates can weigh on oil demand by boosting borrowing costs, pressuring economic growth.
US Treasury Secretary Janet Yellen urged Congress to raise the $31.4 trillion federal debt limit and avert an unprecedented default that would trigger a global economic downturn.
“Uncertainties regarding the US debt ceiling, recent banking issues that could prompt a credit crunch across much of the oil industry and continued strong possibility of a recession remain … significant obstacles” for oil markets, analysts at energy consulting firm Ritterbusch and Associates said in a note.
An extended period of high interest rates could put more stress on banks, but would be necessary if inflation stays stubbornly high, said Minneapolis Federal Reserve President Neel Kashkari.
US producer prices rose moderately last month, the smallest annual producer inflation increase in more than two years.
US President Joe Biden’s administration unveiled a sweeping plan to slash greenhouse gas emissions from the power industry, one of the biggest steps so far in its effort to decarbonize the American economy to fight climate change.
The Organization of the Petroleum Exporting Countries (OPEC) kept its global oil demand forecast for 2023 steady for a third month, saying potential growth in China, the world’s biggest oil importer, could be offset by economic risks elsewhere such as the US debt ceiling battle.
New Chinese bank loans tumbled far more sharply than expected in April, adding to worries that the economy’s post-pandemic recovery is losing steam.
On the supply front, Iraq has sent an official request to Turkey to restart oil export flows through a pipeline running from the semi-autonomous Kurdistan Region in northern Iraq to the Turkish port of Ceyhan, which could add 450,000 barrels per day (bpd) to global crude flows.