OIL SLIPS ON DEBT CEILING FEARS

OIL PRICES fell on Friday, as investors worried that US politicians would fail to agree on a new debt ceiling and trigger a default that would hurt the economy and reduce fuel demand.

Brent futures settled 28 cents, or 0.8%, lower at $75.58 (about R1 468) a barrel.

West Texas Intermediate US crude for July expiry fell 25c, or 0.3%, to $71.69 a barrel.

The less active US crude contract for May, due to expire today, closed down 31c, or 0.4%, to $71.55 a barrel.

Brent and US crude prices nevertheless notched their first weekly gains in a month, with the both benchmarks rising about 2%.

Oil gave up gains of as much as a dollar after Republicans in the US House of Representatives and President Joe Biden’s administration on Friday paused talks on raising the federal government’s $31.4 trillion debt ceiling.

The Treasury Department has warned the government could be unable to pay all its bills by June 1.

A White House official said a deal remained possible.

Markets were also spooked by Federal Reserve chairperson Jerome Powell’s comments that inflation was “far above” the Fed’s objective, adding no decisions had been made yet on the next interest rate action.

“It doesn’t look they are going to get the debt deal done today... the chance of a 25 basis point (rate) increase in the June meeting is rising by the day... There’s not a lot for the bulls to hang their hats on,” said Mizuho analyst Robert Yawger.

Following reports of the paused debt ceiling negotiations and Powell’s comments, US stocks, Treasury yields and the dollar all moved lower.

Providing some support for markets, US Treasury Secretary Janet Yellen reaffirmed the strength and soundness of the country’s banking system in a meeting with bank CEOs on Thursday, the Treasury Department said in a statement.